Information Technology Liability Insurance is a policy specifically created for Information Technology professionals and contractors.
The policy is a combined Professional Indemnity and Public & Products Liability policy which was created to avoid gaps in coverage that can arise if policies are placed separately. A policy as such offers coverage for both financial loss, injury and/or damage to a third party due to the failure of products, services and advice.
Click here to apply for IT Liability Insurance online.
What the IT consultants insurance cover combines
Getting the right insurance for your needs protects your business and gives you peace of mind. Professional Indemnity insurance protects you and your staff against any legal costs for the advice or services that you provide.
When operating at a client’s office, your own office or in a public location, Public Liability covers you if you were to be sued by any member of the public if they were to be injured as a result of your negligence. Flexible public liability cover up to $20 million, so even if you’re tendering for large public contracts you can arrange cover to suit.
Products Liability covers you should any of your products cause harm to a member of the public. This extends both to products you make and manufacture, but also products you sell direct or wholesale. Flexible limits up to $20 million.
Combined IT consultant Professional Indemnity insurance cover includes:
- Professional Indemnity
- Public and Products Liability Insurance
How your consulting business is covered
In our experience, we have seen that legal uncertainty exists over the character of some of the activities provided by Information Technology consultants. When providing software advice and/or design, are you providing a service or a ‘product’? Understandably, this uncertainty has caused confusion in the handling of claims, and some consultants may find they have the wrong cover for the circumstances that arise.
Should the claim be treated as a ‘service’ and therefore be covered under a Professional Indemnity policy? i.e. the claim arose from a breach of the Insured’s professional duty. Alternatively, should the claim be treated as a ‘product’ under a Public & Products liability policy i.e. the claim arose out of a product or manufacturing fault? The solution is to combine into one policy professional indemnity and products liability with the one insurer. This avoids any doubt.
Combining the professional indemnity and liability insurance with the one insurer also avoids the potential for a dispute between two differing insurers. Potentially those contractors arranging separate professional indemnity and liability policies with differing insurers risk falling into a dispute between insurers as to who is responsible for claim i.e. the professional indemnity insurer views a loss as a product, whereas the liability insurer views the loss as a service. By simply combining the cover under one policy this potential problem is avoided.
Here’s what we do well:
- Computer Consultants
- Hardware/Software Resellers
- Software Developers
- Hardware Manufacturers
- Internet Service Providers
- Web Hosting
- Internet Services
- Telecommunication Services
- Systems Integration
- Maintenance and Repair
- Data Processing
- Data Warehousing/Bureau Services
- Education and Training
- Facilities Management and Outsourcing
- And more!
Why do I need IT Liability Insurance?
Please see below the various claim scenarios specific to Information Technology consultants which resulted in significant losses under either professional indemnity or liability.
Claim Scenarios:
Insured: Reseller of Software
Scenario
- The third party wanted a system to support their accounting and financial reporting requirements as well as a point of sale system to handle their retail and wholesale operation.
- The insured had various stores within a capital city, which were all to be connected to each other and head office. The insured had the distribution rights for a well-known software package, which provided both back office and sales function.
Problem
- Late Delivery of the System.
- Data was dropping out of the point of sale system.
- The automatic ordering system was not updating into the main system.
- The cash reports did not balance.
Outcome
- Breach of Contract claiming that the system was not of merchantable quality & was not fit for stated purpose.
- Breach of Trade Practices Act Section 52 (Misleading and Deceptive) Negligent representation and misstatements.
- Claim: $250,000
Insured: Software Developer
Scenario
- The insured supplied their software to the third party, to run their point of sale requirements and upload into their back office system.
Problem
- The system was slow and unable to cope with the peak times of the third party business.
Outcome
- Breach of Contract, software was not fit for the purpose for which it was supplied, & not of merchantable quality.
- Breach of Trade Practices Act Section 52 (Misleading and Deceptive)
- Claim: $125,000
Insured: Software Developer
Scenario
- The third party investigated acquiring a computer software package to handle both the financial and general business functions.
- The insured and the distributor made a presentation to the third party on the capability of the systems.
- The contract was awarded on the basis of the purchase, training and ongoing support & maintenance of the Systems.
- The distributor undertook the integration of the systems and ran into difficulties. After a period of time the third party requested the insured to become involved in solving the functionality issues.
Problem
- The system failed to meet the performance levels, which were indicated prior to installation.
Outcome
- Breach of Trade Practices Act Section 52
- Negligent in regard to the installation
- Negligent in addressing and correcting problems
- Breach of Contract, as software was not fit for the purpose for which it was supplied.
- Claim: $2,000,000
Insured: Internet Service Provider / Domain Name Register
Scenario
- The Insured as part of its business activities provided domain name registration.
- The Insured did not renew a client’s domain name and it was lapsed.
- Another entity registered a name of a similar nature less than 1 hour after the original domain name was removed.
Problem
- The third party could no longer transact business using the domain name
Outcome
- Breach of Trade Practices Act Section 52
- Allegations of collusion
- Breach of Contract
- Negligence
- Claim: $450,000
Insured: Software Developer & Integrator
Scenario
- An insurance company wanted to reduce the paperwork involved in processing motor vehicle claims.
- Insured tendered & won the contract to provide a workflow management system that involved imaging documents.
- In the tender process it was represented that document retrieval time would be between 2-4 seconds.
Problem
- During the course of the project Insured discovered that the retrieval time could not be achieved but continued to spend money and time on the project.
- The final retrieval time ended up being over 60 seconds
Outcome
- Breach of Trade Practices Act Section 52
- Functionality issues
- Retrieval time not as stated
- Breach of Contract
- Claim: $3,200,000
Insured: Reseller of Software & Hardware
Scenario
- The Insured won a tender to sell & install a warehouse management system for the third party with software imported from the US.
- However, the software had never been integrated into a warehouse of this nature before.
- The project eventually failed after the functionality failed to meet the third parties requirements.
Problem
- System was slow and could not cross check automatically & did not have the promised capacity.
Outcome
- Breach of Trade Practices Act Section 52
- Breach of the Fair Trading Act Section II
- Breach of Implied warranties
- Claim: $300,000
Insured: Bureau Service Provider
Scenario
- The Insured was engaged to provide specialist technology services involving data processing, storage & postage in respect of several large share buy-back schemes.
Problem
- Several hundred shareholders failed to receive notification of the share buy-back & were denied access to the scheme.
Outcome
- Breach of Trade Practices Act Section 52
- Negligence
- Claim: $1,000,000
Insured: Internet Service Provider
Scenario
- The Insured acted as a web host for the third party.
Problem
- During back up procedures the server suffered a power surge and the web site was lost.
- Back up tapes were found to be corrupted.
Outcome
- Breach of Trade Practices Act Section 52
- Negligence
- Claim: $130,000
Insured: Software Developer / Reseller of Hardware
Scenario
- The third party purchased an existing graphic design system & peripherals, which was demonstrated by the insured.
- By the time the system was supplied the insured had released a new version of the software, which was then given to the third party.
Problem
- The new system was commercially unusable and over a long period of time the insured tried to fix the problems but failed to do so.
Outcome
- The third party rejected the system and claimed for misrepresentation and breach of contract.
- Many of the defects were software related but the judge treated the system as a whole (software and hardware) as one 'product'.
- Breach of Trade Practices Act Section 52
- Breach of Contract
- Claim: $1,080,000
Insured: Software Developer & Consultancy
Scenario
- The Insured entered into a contract for the design and development and supply of software.
- Two years later the software was incomplete and contained numerous errors.
Problem
- The third party rejected the software and dismissed the insured.
- The third party abandoned the software altogether and engaged another party to develop a fresh solution.
Outcome
- Proceedings were brought for breach of contract, claiming repayment of the contract price ($600,000) and damages for wasted expenditure.
- The insured relied on a clause limiting its liability to $25,000 in respect of each contract, the third party claimed the terms were unreasonable and therefore unenforceable.
- Breach of Trade Practices Act Section 52
- Breach of the Fair Trading Act Section II
- Breach of Contract
- Claim: $1,400,000