Errors & Omissions For Software Companies

oopsDevelopers and testers work together to ensure that they deliver functioning software with no errors. But in a few instances, mistakes happen especially with more complex solutions. No matter how careful your team is, bugs can slip through the cracks. Sometimes, though, the problem isn’t in the software itself, but in miscommunication from the clients’ end. If they fail to let your team know exactly what they need, but they still threaten to sue after they receive the finished product, then you should be ready to defend your company.

What Does E&O Insurance Cover?

A commercial general liability business insurance policy will not cover you if you are sued in a case such as this. When you’re working with a team — whether employees or independent contractors — you can’t oversee every little thing they do because you can’t be everywhere at once. An errors and omissions insurance policy will cover not only those mistakes you’ve made, but also those of the people you work with or who work for you.

Mismatched Expectations

It also covers discrepancies in the understanding of the term ‘obligations.’ One of the worst things that can happen is when you and your clients unknowingly have different interpretations of what your company’s obligations are. Think about it: Even when you’re in the right, unsatisfied clients can tarnish your company’s reputation with negative feedback, especially when they’re angry. You’ll need damage control, stat.

What Causes Disputes?

The typical cause of major disputes that might trigger coverage under an E&O policy are:

  • misunderstanding between you and your client
  • misrepresentation by you and/or your client
  • incompatibility with software or hardware
  • disagreement on intellectual property rights
  • errors in security
  • violations against the law
  • failure of software to perform according to how it’s represented
  • failure to perform work as stipulated in the contract
  • unforeseen delays

…and many more.

Clients intent on suing are likely to claim financial loss caused by your company’s mistakes, misrepresentation, and/or negligence. Without proper insurance, your company will not only have to contend with an embarrassing PR nightmare, but also with a budget cut. If the amount is really big, the settlement can also put your company into a bankruptcy!

Will you risk it? 

It doesn’t happen all the time, but are you prepared to lose it if it does happen? Sometimes, it takes only one lawsuit to destroy a company.

Don’t take chances on your company’s future. Getting errors and omissions insurance is worth the trouble. Hopefully, you’ll never have to need it, but once you do need it, you’ll be happy you have it.


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