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What Counts as Professional Negligence for IT Freelancers?

What Counts as Professional Negligence for IT Freelancers?

Wednesday, February 10, 2016/Categories: errors-and-omissions-insurance

Legal terms like “professional negligence” or “errors and omissions” get bandied about in freelancer contracts and IT insurance policies. While you probably have a general idea about what makes someone negligent, let’s focus specifically on how IT contractors could be accused of professional negligence.

Definition of Professional Negligence

Negligence means two things:

  1. Someone neglected to do something, and
  2. That neglect caused a problem.

For instance, the department of public works could be negligent if it left a manhole cover open in the middle of the road. If someone fell in, a lawsuit would be sure to follow.

In a similar way, IT freelancers can be professionally negligent if they fail to do something in their work and a client suffers a financial injury. If a client thinks you delivered substandard work or failed to take certain precautions, you could face a negligence lawsuit.

Professional negligence can come in many forms for an IT freelancer:

  • A data security incident.
  • Improper security configurations.
  • Data loss.
  • Miscommunication about what functionality is offered by an IT solution.
  • Improper training.
  • Missed deadlines.
  • Breach of duty.

That’s a high-level summary. To get a better idea of the risks you have in IT, let’s look at two lawsuits that demonstrate how tech professionals could face a professional negligence lawsuit.

Ashley Madison Data Breach Was a Professional Negligence Case

The Guardian reports that AshleyMadison.com – the infidelity website that was hacked – is being sued by users who claim the site was negligent in protecting their data.

In this case, users are alleging that Ashley Madison failed its duty to “use reasonable and industry standard of care to secure [user] information against theft and misuse.” (See the lawsuit documents here [PDF].) Essentially, Ashley Madison had a database of user information that it didn’t encrypt. Once cyber criminals broke in, it was easy pickings.

Storing private data in an unencrypted format could lead to professional negligence lawsuits.

Upgrade Problems Fall under Professional Negligence

Reuters details how Kansas-based IT company ANS sued a vendor called FalconStor Software. ANS alleges that FalconStor Software botched its data storage upgrade. What went wrong? ANS’s customer data was apparently corrupted and access to this data was interrupted. ANS claims that FalconStor should have done a better job – which makes this a professional negligence case.

As a result, ANS filed a professional negligence lawsuit seeking restitution for:

  • Lost revenue.
  • Lost customers.
  • Harm to the company’s reputation.

Whether you’re doing a data migration or installing new sales software, if something goes wrong, a client can claim you were professionally negligent.

The Surprising Reason You Could Be Sued For Professional Negligence

Professional negligence lawsuits may happen when you fail to take all the precautions an IT professional should. Well, actually, there’s another reason you could be sued in a professional negligence case – a client accuses you of shirking your duties.

Remember that lawsuits are a dispute between two parties: you and your client. Often, professional negligence lawsuits occur when a client thinks you could have done a better job.

The moral of the story: disappointed clients could sue you, even if there’s no merit to their claim.

Disagreements about functionality, scope, and data security could lead to a major lawsuit. It doesn’t matter so much whether you’ve actually made a mistake. All that matters is that your clients think you’ve made a mistake. See “3 Client Risk Factors that Increase Your Professional Liability Exposure” for more on managing client risk.

Professional Negligence: Insurance Options for IT Freelancers

Many IT professionals want to know if there’s such a thing as “Professional Negligence Insurance.” You’re in luck! There’s Professional Liability Insurance (also called Errors and Omissions Insurance).

Professional Liability Insurance may cover the cost of a lawsuit when a client claims you were professionally negligent. So if you miss a deadline after a subcontractor flakes out, technology Professional Liability Insurance could cover your business.

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