Intuitive Insurance Articles

Understanding IT Liability

Information Technology’s hold on our world has become increasingly tighter due to the demands of our high speed, interconnected and ever-changing global society. The ever-increasing need for improved speed to market, greater competition, customer expectation, and increased reliance on outsourcing systems and data, has meant that information technology has continued to evolve with ferocity. As such, many individuals and businesses today could not fathom a world without technology.

However, as businesses come to rely more and more on Information Technology (IT) for the smooth and successful operation of their business, they are also significantly more vulnerable to litigation. IT professionals and businesses face increased exposure for the quality of the advice they provide, as well as for any damage that may be caused by the performance of the products they supply. In addition, IT companies face financial loss threats due to systems not performing as intended or not being delivered within contractual time frames, due to breaches of Intellectual Property Rights, such as copyright, trademark or register design, or due to the loss of data.

To address these issues insurers have developed Information Technology Liability Insurance, which ensures specific protection for organisations against legal liability arising from the failure of their products, services and/or advice in the conduct of their business.

Why is IT Liability Insurance important?

IT Liability Insurance is a specifically designed insurance product for the Information Technology industry that incorporates both Professional Indemnity and Public and Products Liability into one insurance solution.

The Professional Indemnity section of the policy provides comprehensive protection from claims for financial loss from the performance of your professional services; and the Public and Products Liability section provides protection for personal injury as well as any damage caused by the failure of the IT products provided by the business.

Because of the ambiguous nature of Information Technology services uncertainty can often arise as to whether a claim should be treated as a ‘product’, for example due to a manufacturing fault, in which case it would fall under a public and products liability policy; or whether it should be treated as a ‘service’, for example a breach of the insured’s professional duty, in which case it would fall under a professional indemnity policy. If the policies are placed separately, or more importantly, if they are placed with different insurers, a claim may potentially fall between the two policies. The combined IT Liability Insurance policy is therefore valuable in closing this gap.

How do I know if I need IT Liability insurance?

Generally, any organization or professional that develops, manufactures, licenses, sells, provides, advises or integrates any form of Information Technology or related services is exposed to litigation. It is therefore advisable that they be covered under an IT Liability policy. Such organisations or professionals may include, but are not limited to, software developers, electronic equipment manufacturers, telecommunication providers, Internet service providers, IT consultants, web hosting service providers, hardware and software resellers, and IT maintenance and repair technicians.

What will my IT Liability insurance policy cover me for?

Information Technology Liability insurance may cover you for:

  • Financial losses arising from the supply or installation of products or services that fail to perform their intended function.
  • Financial losses arising from disingenuous professional advice.
  • Financial losses arising from the loss of documents or data.
  • Financial losses arising from an unintended infringement of a third party’s intellectual property rights.
  • Financial losses arising from unintentional defamation.
  • Legal liability to pay compensation for personal injury or damage to property caused by an occurrence connected with the insured’s business.

As the growth and development of Information Technology continues to expand, the application of this technology throughout the economic and business sectors will only become more widespread. This almost complete dependency on technology means that Information Technology Liability Insurance is becoming more and more important in ensuring that your exposures are covered. The unique packaged product of IT Liability Insurance that combines Professional Indemnity and Public and Products Liability safeguards professional claim management, protecting you from a range of third party and related risks.

The best way to ensure that you are paired with the right IT Liability policy is to work with an experienced broker who can help in determining what is right for you and your business. If you would like more information, please drop us a comment, email, or call Intuitive on (02) 9493 6111. We’d love to hear from you!

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