Technology errors and omissions insurance

Technology errors and omissions insurance, Tech E&O, is the professional liability form written for businesses whose product is software or technical work. Travelers' overview describes allegations involving technology products and services, and our comparison of professional liability and E&O explains why those labels overlap.

It generally addresses allegations that your work, product or advice caused a client a financial loss.

Key takeaways

• The decision: Technology E&O is the professional liability form for businesses whose product is software or technical work. It responds to failures of your work; cyber responds to incidents involving data and systems.
• Keep in mind: Technology companies should assess both professional and cyber exposures; the coverage needed depends on their work, data, contracts and policy terms. The definition of professional services in the policy is the gate, if it does not describe what you sell, the limits matter less.
• Next step: Gather your standard client contract, a description of what you build and for whom, your revenue, and your subcontractor arrangements before requesting terms.

What it generally addresses

• A defect or failure in software you built or licensed that cost the client money.
• A missed contracted deliverable, or a failure to perform a promised service.
• Negligent technical advice, including advice on architecture, integration or migration.
• An implementation that did not perform as the contract described.
• Failure to meet a service level the contract set out, where the policy provides for it.

Travelers' overview of technology E&O risks describes the exposure using its own products; your proposal's wording controls what is covered.

Many technology policies are written to combine Tech E&O and cyber in one form. That is convenient and it is not automatic, read which insuring agreements a combined policy actually contains, and what limit each one has.

Tech E&O and cyber are different questions

As a starting point: Tech E&O addresses covered allegations about technology products or services. Cyber addresses covered data and system incidents, including some accidental events. An incident can involve both, and wording determines the response.

A single incident can raise both. A defect that exposes client data is plausibly a Tech E&O allegation about the defect and a cyber matter about the exposure. That is a reason to review how the two policies interact, and, where they sit with different carriers, to ask how each responds when the other is also involved. Our guide to cyber insurance for small businesses covers that side.

What it generally does not replace

• General liability, third-party bodily injury and property damage.
• Commercial property, your own equipment.
• Directors and officers, claims against directors and officers arising from management decisions.
• Intellectual property beyond what the form provides. Some Tech E&O forms address certain infringement allegations arising from your work; the scope varies considerably, so read it rather than assuming either way.

The wording that decides what you have

• The definition of professional services. The gate. It should describe what you actually build and sell. Compare it against your website, your standard contract and your invoices.
• Defense costs inside or outside the limit. Where defense erodes the limit, money spent defending reduces what remains to settle.
• The retroactive or prior-acts date. Work performed before it is generally outside the policy. This matters most when switching carriers, a new policy with a recent retroactive date can leave years of delivered work uncovered.
• Claims-made reporting duties. Report claims, and in many forms known circumstances, as the policy requires. Late notice can create a coverage problem.
• Contractual liability. Many forms limit coverage for promises, warranties, guarantees and liquidated damages accepted in client contracts. This is worth reading against the contracts you actually sign.
• Subcontractors. Whether work performed by subcontractors on your behalf is within the policy, and whether you are required to verify their own coverage.

Read client requirements alongside your exposure

Client contracts can set a minimum limit. Also assess plausible losses and whether the required coverage matches the work; a contractual minimum is not proof that the limit is sufficient.

Enterprise and public-sector agreements routinely specify a professional liability or Tech E&O limit, sometimes alongside a cyber limit, and sometimes above what a growing company would otherwise buy. Reviewing those requirements across your largest contracts before requesting terms is quicker than discovering mid-negotiation that your limit disqualifies you.

Two contract terms interact with the policy closely enough to be worth reading together:

• Limitation of liability. A cap on your liability, often expressed as fees paid over the preceding twelve months, limits the size of the claim you can face. A contract with no cap, or with carve-outs that disapply it for data or confidentiality breaches, leaves the exposure open. Underwriters read these clauses, and consistent use of a reasonable cap in your standard agreement tends to help.
• Indemnities. An indemnity is a promise to cover another party's losses, and it can reach further than what the policy would otherwise respond to. Where a contract asks for a broad indemnity, it is worth asking how the policy treats it before signing.

Your standard contract is one risk control to review with legal counsel. A policy cannot narrow a promise you have already made.

How a combined Tech E&O and cyber form fits together

Many technology policies bundle both. The convenience is real; so is the need to read what you actually have.

Check whether the two sit under a shared limit or separate limits. Under a shared limit, a large cyber event can erode what remains for a professional liability claim in the same period, and covered costs from an incident involving both, such as a defect that exposes client data, may draw on that same pool. Check also whether the retention applies once or separately per insuring agreement.

One carrier may make coordination simpler, but a combined policy does not guarantee coverage or prevent disputes. Compare its limits, exclusions and incident-response process with separate policies.

What underwriters ask before quoting

Expect questions on what you build and for which industries, revenue and its concentration among a few clients, your largest contract value, whether you use a standard contract with limitation-of-liability wording, your use of subcontractors and open-source components, your testing and release process, prior claims and known circumstances, and whether you hold client data, which pulls the cyber questions in alongside.

Clients in regulated industries, contracts without liability caps, and revenue concentrated in one or two clients all tend to draw more attention. So does work that sits close to a client's money, safety or regulatory obligations, because a failure there produces a larger loss than the fee for the work would suggest. Being able to describe your testing and release process concretely tends to help more than describing it as rigorous.

Expect the questions to change as the business grows. A company moving upmarket, entering a regulated industry, or shipping a product that makes automated decisions is describing a different risk than it was at the previous renewal, and renewal is the moment to say so rather than carry forward last year's description.

Before you request terms

Gather your standard client contract, a plain description of what you build and for whom, revenue figures, your subcontractor arrangements, and any contractual insurance requirements your clients impose. Describe the work consistently across all of it.

Our quote checklist covers what to assemble, and how commercial insurance quotes work sets out how to compare the proposals once they arrive.