A couple of years ago, my friend from a law firm decided to learn some coding just for the fun. After some lessons, he discovered how similar contracts and software are in nature – writing a code is like drafting a contract. Both have an idea how it should work to become a functional piece of program or contract.

Like business relationships, technology can also let you down. The biggest software failures in recent history have affected some of the biggest companies and millions of customers around the world. Very often software companies developing and supporting their systems are to be held liable for damages.

Case studies: how technology can cut us off

Imagine you are having a nice Sunday with your family and scrolling your phone to check e-mails just to discover one of the largest airports in Europe has cancelled over 100 flights due technical issues. This happened twice in London Heathrow Airport back in 2019 and 2020. Who are to blame? Technology companies who created, maintained and amended the systems.

Or something more recent – a major outage affected several high-profile websites, including Amazon, Reddit and Twitch. It was discovered that the outage was caused by service configuration that triggered disruption in specific locations. For these companies’ outages cost around $250.000 per hour and it is claimed back from the service providers.

The problems can start out of contractual relations too, and the technology company can find itself in the middle of a court case. Facial recognition start-up Clearview AI was sued in a potential class action lawsuit that claims the company crabbed up photos from employment sites, news sites, educational sites, and social networks out of “pure greed” to sell to law enforcement. It is currently difficult to estimate the final cost and claimed damages related to this case.

How to save the business in these situations?

You can’t do much to avoid technology failures totally, but there is a way to find some redemption in the complicated situations. When it comes to mitigating the risk and finding a proper insurance policy, technology insurance is one of the very first insurance products recommended for technology companies.
This is covering the liability arising from the technological activity. For instance,

  • damages related to the errors
  • failures to perform, breach of contract
  • security failure
  • media liability
  • intellectual property breach
  • legal expenses related to the actual or alleged claim.

The core of this insurance is professional indemnity, which is rather related to errors and negligence and not directly to bodily injury or property damage like general liability policies.

Shortly, this is the solution to transfer your company’s financial risk and meet the contractual requirements. Insurance should be the first risk mitigation measure to consider while starting technology company, concluding the first contract or considering service or product launch.

Simple steps to get the insurance policy done

Buying your first technology insurance policy is far much easier than creating the technology itself. We only need your input to introduce your company to the insurance market and obtain quotes. The rest is for you to decide if and when you need the coverage be effective.

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Helen Evert

Practice Leader Liability & Financial Lines – Estonia

T +372 5824 3096