5 Ways Technology Business Insurance Can Protect You from the High Cost of Lawsuits

When you run a small technology business, you try your darndest to make sure you do everything right. But no matter how carefully you check, double check, and even triple check something, sometimes errors are going to get through.

Any business, especially a small business, faces risks. Sometimes that means being on the receiving end of a lawsuit from an angry client – which could mean financial disaster for your business without technology business insurance policies in place.

When Mistakes Happen, Lawsuits Often Follow

Let’s take a look at examples of how a client project can go off the rails and a small IT business can get sued.

Scenario #1: You screw up. Michael Carroll (@InsuringLawyer), president of , sets the scene:

  • Say you’re a network administrator and you tell a client, “Hey, I need to take your network down, but don’t worry, I’ll do it Friday evening, and we’ll get it back up on Monday.”
  • But you don’t get it back up Monday, and it’s a week and a half later before the network is finally up and running.
  • If a client loses a week and a half of business, it would hurt them tremendously.

Carroll says a client would have “every reason to bring a suit” against your for taking the network down and putting them out of business for 10 days.

Scenario #2: Your client screws up. Here’s how this one might play out:

  • Your business is hired to create an app for a small restaurant chain that enables customers to order and pay before they arrive at the restaurant.
  • The client is unresponsive with necessary approvals to keep things moving. You are now way behind schedule, but the client demands you deliver the app by the original date.
  • Without additional time for testing and bug fixes, the app is not quite ready at launch. Users experience difficulty getting their food orders to process on the app and blast your client on social media.

Though the delay on the project stems from the client’s unresponsiveness, they immediately hit you with a lawsuit for delivering a defective app.

When it Comes to Lawsuits, Even a Win Can Feel Like a Loss

In the first scenario, you knew the lawsuit was probably coming. You messed up – big time. But in the second scenario, you can’t believe your client is suing. Your contract explicitly stated the necessary timelines, what was required on the client’s side to keep the project moving, and how any delays on the client’s end would result in a delayed launch. You had it all in writing. It’s not your fault – it’s theirs!

Well, tough luck.

“There is no absolute foolproof way to avoid a lawsuit because, unfortunately, people can sue for any reason, or even no reason,” says Nina Kaufman (@NinaKaufman), business attorney and strategist at .

Lawsuit costs can add up – fast. Just for starters, you could be looking at:

  • Attorney fees.
  • Court costs.
  • Expert witness expenses.
  • Missed work time.
  • Settlements or judgements.

As a small IT business owner, in addition to dotting i’s and crossing t’s, the best way to protect yourself against the threat of a lawsuit is by making sure you have the right IT business insurance.

Meet the Technology Business Insurance Dream Team

Even with proper prevention, you can’t shield your IT business from every risk. You can ensure that you have a layer of protection against lawsuits. That’s where IT insurance can help, with policies such as…

  • General Liability Insurance. This policy can guard against many common office mishaps, like slip-and-fall claims. It’s a solid foundation to protect you from the cost of third-party accidents, injuries, and property damage.
  • Business Owner’s Policy. BOP Insurance combines General Liability Insurance with Business Property Insurance into a single policy, normally at a lower rate than if you bought them separately. It’s typically only an option for businesses in low-risk industries, like IT. Take advantage of the premium savings and buy the bundle!
  • Professional Liability Insurance. Also known as technology Errors & Omissions Insurance, this coverage kicks in if your business faces a suit over a mistake or error you make. And that’s even if the claim is unfounded or frivolous.
  • Data Breach Insurance. This coverage can protect you if a client experiences a data breach and can tie it back to work you did for their company. Data breach lawsuits tend to be expensive, which is why it’s important to make sure you’re covered, especially for any third-party claims. The good news is that most E&O Insurance comes with built-in data breach protection.
  • Subcontractor insurance or self-employed insurance. Make sure that any subcontractors or other self-employed workers you bring on for a job have their own Professional Liability Insurance. Kaufman advises working “with people who have their own independent business entity, instead of hiring the individual directly.” Meaning, hire subcontractors who act as their own small business – complete with Professional Liability Insurance.