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Technology vs. Laws: Rideshare Edition

Technology vs. Laws: Rideshare Edition

Lyft, Uber, and ridesharing mobile apps show how laws lag behind tech innovation. Here's how IT contractors are exposed to more lawsuit risk by old laws.

Thursday, July 3, 2014/Categories: errors-and-omissions

The Pittsburgh Post-Gazette reports on the difficulty ridesharing companies such as Lyft and Uber have had as regulators struggle to decide which laws apply to this new service. Regardless of where you stand on these new ridesharing companies, they highlight an interesting side effect that often follows new technology: when laws don't keep up with new technology, tech companies can exist in a legal gray area that leads to more lawsuits.

What does this mean for IT professionals? Let's take a closer look at how IT lawsuit risk has changed with innovations in technology.

Disruptive Technology Increases IT Risk

"Disruptive" technology has become a buzzword lately. While you might get tired of hearing about how this or that new technology is going to reshape the market, it's important to remember that innovation can be disruptive, especially in IT. Mobile technology made ridesharing a feasible, low-cost option, undercutting taxicabs and other kinds of transportation we are used to seeing.

Technology can also disrupt the law. Old laws don't always know what to do with new technology. For instance, old laws mandated that taxi cab drivers have certain insurance policies and follow certain regulations. But many Uber drivers aren't fulltime drivers. They use their car for personal driving and only pick up riders when they have their mobile app turned on. They're sort-of a cab driver and sort-of not.

So what does all this talk about Uber and Lyft have to do with small IT businesses? Well, you deal with this kind of disruptive technology on a day-to-day basis. In many ways, the IT world has already seen its share of disruptive tech: cloud services, SaaS, and web apps have replaced more traditional in-house IT solutions.

And yet, a funny thing happened on the way to the cloud. As traditional IT was being replaced, IT consultants and contractors retained all the liability they used to have. If you use web apps or cloud services, clients can still sue you if they have problems with these third-party services. For a real-life example of this see “DDoS Attack Shuts Down SalesForce, Exposes IT Department to Liability.”

Just as we saw with Lyft and Uber, the law just doesn't know what to do with cyber liability. And judges often err on the side of caution, punishing the IT contractor for any third-party issues.

Battles Played Out in Court: Why Old Laws Mean Lawsuits for New Technology

Unfortunately, all this means that IT contractors are exposed to more liability – risk that could lead to IT lawsuits. As you know, lawsuits are expensive and often cost hundreds of thousands of dollars. A data breach on a cloud-based solution could lead to a long, costly lawsuit that you'd have to pay for out of pocket.

Because lawsuits are so expensive and IT contractors face many risks, tech professionals often manage their lawsuit risk with Errors and Omissions Insurance. This IT liability insurance covers lawsuits over mistakes you make in your work. But it also covers alleged mistakes, which means that if your clients file an unfair lawsuit against you, the policy still covers the cost of your legal defense and any damages the judge rules you owe.

E&O Insurance is important for tech professionals because it covers the unpredictable risk of tech-related lawsuits. Submit an online insurance application for free quotes on IT liability insurance.

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