IT Liability Insurance

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The information and technology industry is complex and developing at an increasing rate. As more businesses depend on online systems for core business operations, IT professionals face a range of potential liabilities from clients and third parties that can have crippling financial and reputational consequences should something go wrong.

As technology evolves, the need for IT Liability Insurance becomes even more critical, helping provide essential protection against common liabilities inherent in the information and technology industry.

What is IT Liability Insurance?

IT Liability Insurance protects you and your business against legal liability occurring due to the failure of your IT products, services or advice. This type of policy combines professional indemnity, public liability and product liability into one insurance solution.

IT Liability Insurance provides protection for instances where an IT product fails, someone hacks into your IT systems or software and destroys or steals sensitive information, and when something goes wrong based on advice you have provided on an IT product or service.

If you are a consultant or work in an organisation that develops, manufactures, sells, licenses, or integrates any form of information technology or related services you should consider IT Liability insurance.

This includes occupations and organisations such as:

  • Software Developers
  • Electronic and Telco Equipment Manufacturers
  • Telecommunication Providers
  • Internet Service Providers
  • Hardware Manufacturers
  • IT/Computer Consultants
  • Web Hosting Service Providers
  • Systems Integration
  • Hardware/Software Resellers
  • Maintenance and Repair
  • Data Processing and Warehousing
  • Education and Training
  • IT Maintenance and Repair Technicians
  • Facilities Management and Outsourcing

Should I consider an IT Liability policy over separate Indemnity and Liability policies?

Due to the nature of IT, where you’re providing both a service and product simultaneously, it’s sometimes unclear where a claim should fall. The uncertainty is whether it should be placed under a product or public liability policy (third party claims for property damage or personal injury) or a professional indemnity policy (third party claims for financial loss).

This means that your claims could slip through the cracks between the two policies, particularly when they are placed with separate insurers. It’s best to get cover under the one IT Insurance policy, which will include all of the above.

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Claims Examples

A third-party organisation sought to acquire a computer software package for financial and business functions. After presentations by the insured and a distributor, the contract was awarded on the basis of the purchase, training and ongoing support and maintenance would be provided. During the intergation of the systems, the distributor ran into some issues and after some time, the third-party requested the involvement of the insured. Unfortunately, the system failed to meet the performance levels promised during their agreement.

This was a breach of Trade Practices Act Section 52. Negligence was shown in regards to the installation of the software and in addressing/correcting the issues. There was also a breach of contract as the software was not fit for purpose, as agreed upon at the start. The claim was a total of $2,000,000.

A third-party wanted a system to support their accounting and financial reporting requirements as well as a point of sale system for their retail and wholesale operation. The insured had various stores, which were all to be connected to each other and also to their head office. The insured had distribution rights for a well-known software package, which provided both back office and sales functions. Unfortunately, the system was delivered late, data was dropping out of the POS system, the automatic ordering system was not updating in the main system and the cash reports did not balance.

There was a breach of contract and the system was not fit for purpose. There was also a breach of the Trade Practices Act Section 52 (Misleading and Deceptive) Negligent representation and misstatements. The total claim was $250,000.

The insured was tasked with delivering specialised technology services related to data processing, storage, and postage for multiple large share buy-back schemes. Unfortunately, a significant number of shareholders did not receive notifications about the share buy-back, resulting in their inability to participate in the scheme.

There was a breach of the Trade Practices Act Section 52, where the technology specialist showed negligence. The total claim was $1,000,000.

How Coverforce Can Help

At Coverforce, our expert team of insurance brokers understand the pressure businesses are under to meet the expectations of clients and the risks IT professionals face every day on the job. That’s why we will take the time to assess your individual risk management requirements and exposures and deliver an insurance solution best meets your business needs.

For more information or to arrange cover, please contact our team at 07 3613 7900 . Alternatively, you can simply click below to fill out a quote form and one of our insurance brokers will get in touch with you shortly.

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