Tech E&O vs. cyber insurance

Technology errors and omissions insurance (tech E&O) combines errors and omissions insurance with cyber insurance and can be less expensive than buying these policies separately.

Also known as professional liability insurance, errors and omissions insurance covers your legal expenses if a client sues you over a claim of professional negligence, such as failing to deliver on a contract, not meeting a deadline, or making a mistake that costs the client money.

E&O coverage also covers client lawsuits and claims of:

• Errors or oversights
• Undelivered professional services
• Missed deadlines
• Budget overruns
• Incomplete work
• Breach of contract
• Poor advice

Tech E&O typically includes a specific type of cyber insurance that provides third-party coverage for legal costs related to lawsuits over data breaches and cyberattacks.

Tech E&O insurance and cyber insurance offer similar types of liability coverage, though they each address different types of risks.

Cyber insurance, also known as data breach insurance, covers the cyber risks faced by your own company and those of your customers.

If your own business faces a cyberattack or data breach, your cyber insurance covers the costs of:

• Investigating the breach or cyberattack
• Notifying customers and regulators (often required by state or federal laws)
• Credit monitoring for those affected by the breach
• Public relations and reputation management costs

Technology E&O insurance covers lawsuits from customers if they accuse you of a mistake that costs them money.

This policy includes coverage for your legal expenses, such as:

• Attorney fees and the costs of litigation
• Court costs
• Out of court settlements
• Legal judgments against your business (e.g., Orders of payment from a judge or jury)

The type of insurance you need really depends on the risk exposures for your business. For a cyber liability policy, consider the types of cyber risks you face and the impact a cyber insurance claim could have on your business.

If you regularly store customer data, such as credit card numbers and banking accounts, you could be at considerable risk of an expensive lawsuit and a reputational loss if any of this data storage is compromised. For this, you’d need third-party liability coverage through a tech E&O or a cyber insurance policy.

You could also be at risk if your work involves client networks and computer systems. If any of your customers claim you failed to protect them from a data breach or cyber extortion, your business could face an expensive third-party lawsuit. To insure against this, you’d need a cyber insurance policy, because tech E&O doesn’t cover first-party claims.

In either of these cases, cyber insurance could help your business with the expensive costs and lawsuits that would result from a breach.

With errors and omissions or professional liability insurance, you might consider:

• Does your expertise and advice have a significant impact on your client’s profits?
• What are the odds of yourself or an employee making a mistake?
• Do you and your staff always meet your deadlines?
• Do customers ever complain about your work?
• How likely are your clients to sue if they’re dissatisfied with your work?
• Could your business afford an expensive lawsuit, even a frivolous one?

In such a litigious society, many small business owners find a tech E&O policy is an affordable way for technology companies to manage risks and reduce the impact a lawsuit can have on their bottom line.

Consider how this type of coverage could benefit a tech company:

• Software developers and service providers could be at risk if a software glitch exposes their customers to a network security breach.
• Network security and cybersecurity companies could face an expensive lawsuit, as well as data recovery costs if they’re accused of failing to block a ransomware attack.
• Website designers might face a customer lawsuit for failing to meet a deadline, or for creating a faulty website that costs the client money.

By combining your E&O coverage with a cyber liability policy, a tech E&O policy can be an affordable part of your risk management plan. A tech E&O policy is typically less expensive than buying your errors and omissions insurance and your cyber insurance separately.

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