Cyber Liability

High-profile cyber attacks on companies such as Target and Sears have raised awareness of the growing threat of cyber crime. Recent surveys conducted by the Small Business Authority, Symantec, Kaspersky Lab and the National Cybersecurity Alliance suggest that many small business owners are still operating under a false sense of cyber security.

The statistics of these studies are grim; the vast majority of U.S. small businesses lack a formal Internet security policy for employees, and only about half have even rudimentary cybersecurity measures in place. Furthermore, only about a quarter of small business owners have had an outside party test their computer systems to ensure they are hacker proof, and nearly 40 percent do not have their data backed up in more than one location.

Technology Errors and Omissions

Every business has unique risks that can seriously harm an organization’s operations if not properly protected against. As a business utilizing technology to produce and deliver products and/or services, it’s important to recognize and take precautions against risks that your commercial general liability (CGL) coverage doesn’t include. Technology professional liability coverage, also referred to as tech errors and omissions (E&O), is essential for companies using technology because it addresses a lack of protection in CGL policies, which typically do not cover claims of third-party financial harm.

Tech E&O coverage would apply in the following situations:

A mistake was made and an error in the code of a website or program your company produced isn’t found before it is implemented. A third party depends on this product or service to operate its business and its operations are stalled due to the error, causing them a financial loss.

In this case, CGL coverage would not cover a claim or any costs of litigation because of the presence of an error or omission and the lack of resulting physical damage to the third party’s property. It should be noted that tech E&O policies usually exclude product recall, but some will accept damages for loss of use of a failed product.