Clients could accuse your tech company of professional negligence if you fail to provide a service or meet their expectations.
What is professional negligence?
Negligence means two things:
- Someone neglected to do something, and
- 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 financially. 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
To clarify, here are two examples that demonstrate how tech professionals could face a professional negligence lawsuit.
Example 1: Lack of security measures by First American Financial
The insurance company First American Financial Corporation recently faced a class action lawsuit for leaving over 885 million mortgage documents exposed to anyone with a web browser. The documents contained Social Security numbers, bank account numbers, and other personal information belonging to customers.
Storing private data such as this in an unencrypted format is prime fodder for a professional liability lawsuit, specifically a technology errors and omissions lawsuit.
Example 2: Mismanaged firewall by Capital One
Having a security vulnerability is enough to get sued. But it's even worse when hackers exploit it.
In 2019, Capital One made a mistake that led to a misconfigured web application firewall.
The security breach led to a hacker stealing personal information belonging to more than 100 million people, including credit scores, account balances, and more. Capital One fixed the issue and worked with law enforcement to track down the hacker; it also faced a class action lawsuit.
The surprising reason you could be sued for professional negligence
Professional negligence lawsuits can happen when you fail to take all the precautions an IT professional should. However, there’s another reason you could be sued in a professional negligence case: a client accuses you of shirking your duties.
Often, professional negligence lawsuits occur when a client thinks you could have done a better job. Disappointed clients can sue even if there’s no merit to their claim. In particular, 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.
How does insurance protect against accusations of professional negligence?
Errors and omissions insurance, sometimes called professional liability insurance, can cover the cost of a lawsuit when a client claims you were professionally negligent. For example, if you miss a deadline after a subcontractor leaves unexpectedly, this policy could pay your legal expenses if the client sues. That could include:
- Attorney's fees
- Court-ordered judgments
- Witness fees
This is a crucial policy for any tech company whose clients depend on your advice or expertise, such as IT consultants and cybersecurity experts.
Get free quotes and compare policies with TechInsurance
TechInsurance helps small business owners compare business insurance quotes with one easy online application. Start an application today to find the right policy at the most affordable price for your business.