Who is Covered Under an IT Liability Policy?

Information Technology Insurance

IT-liability-what-is-coveredProfessionals in the information technology sector face potential liabilities from clients and third parties everyday. Clients expect good, sound advice with a quality product including installation. They rely on you to get it right so their systems work efficiently and they can get on with business.

The problem is good advice and service doesn’t always protect IT professionals from liability. Disgruntled clients will seek to apportion blame when things go wrong and systems break down. This can lead to claims against them for compensation and legal costs which can in turn lead to a considerable time commitment to settle or defend the claim. IT Liability policies combine Professional Indemnity (PI), Public Liability and Products Liability to cover the IT professional from a range of exposures that could arise out of the services performed for a client.

Who is covered under an IT Liability Policy?

An IT Liability insurance policy typically will cover the following:

  • The entity, including any subsidiaries (held or acquired during the policy period);
  • All past, present or future partners, directors and executives;
  • All past, present or future employees; and
  • Upon request, Contractors, Sub-contractors as individuals as well as liability arising out of the work performed on behalf of the entity.

IT Liability insurance policies need to provide cover to all persons who provide information technology services including those that may not be providing these services but may be named in the claim due to their position within the entity.

Who is the target market for an IT Liability Policy?

Those that should consider purchasing an IT Liability policy include companies performing the following services:

  • computer consultants
  • hardware/software developers, resellers & manufacturers
  • internet service providers
  • web hosting
  • internet services
  • telecommunication services
  • IT recruitment and placement services

What do IT Liability policies provide cover for?

IT Liability insurance provides cover for a breach of the policyholders professional duty to a client in the performance of information technology services. This is the professional indemnity cover. It also provides cover for products and public liability – this is discussed in the next column.

Depending on the insurer, professional indemnity for a breach of information technology services can mean a range of different activities however the individual entities activities are more often than not referred to in schedule of the policy and therefore the policy will only cover those specific services listed.

Additional Cover available – IT Liability Policy

In addition, information technology professional indemnity policies will include cover for:

  • Misleading and Deceptive conduct: in respect of the work to be performed;
  • Defamation;
  • Breach of Intellectual Property Rights: of a customer, client or third party including competitors;
  • Loss of Documents/Data;
  • Defence Costs associated with covered claims.

What about Products and Public Liability?

As part of the coverage under IT Liability policies, many insurers also provide products and public liability for claims arising out of the products the consultant may install into a clients system or bodily injury which may occur on their premises arising from the work performed by the consultant. To some extent, the inclusion of these covers is in response to commercial contracts between consultants and clients requiring these insurances in addition to professional indemnity.

The benefit of having professional indemnity, products liability and public liability contained in the same policy is that, in theory, no claims can ‘slip through the gaps’. If the exposures were covered on separate policies a situation may arise where two insurers covering separate exposures deny indemnity of the claim by arguing that the other policy should have been triggered opposed to the professional indemnity or the products/public liability policy.

Professional Indemnity – Claims made & notified

The professional indemnity section of IT Liability policies is issued on a claims-made and notified basis. This means that the policy only covers claims first made against you during the policy period and notified to the insurer in writing during the Policy Period.

It should be noted that the IT Liability policies do not provide cover for any claims made against you during the policy period if at any time prior to the commencement of the policy period you became aware of facts which might give rise to those claims.

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