Tech E&O Insurance 101: What It Covers & Claim Examples

Tech E&O Insurance: What It Covers (and Claim Examples)

If your business provides technology services or develops tech products—whether it's software, IT consulting, or data storage—you’ve likely heard about Technology Errors & Omissions Insurance, or Tech E&O for short. But what exactly does it cover, and why is it so important?

In today’s fast-moving tech world, even a small mistake can lead to big financial losses or legal headaches. That’s where Tech E&O comes in.

What Is Tech E&O Insurance?

Technology Errors & Omissions Insurance is a type of professional liability insurance specifically designed for businesses and individuals in the tech space. It provides protection against claims that arise from mistakes, failures, or oversights in the services or products you deliver.

Unlike general liability insurance (which covers things like bodily injury or property damage), Tech E&O is focused on professional mistakes—the kind that could cost your clients money and lead to lawsuits.

What Does Tech E&O Insurance Cover?

Here’s a breakdown of the key coverage areas:

1. Coverage for Negligence

If a client claims your tech service or product didn’t work as intended and caused them financial harm, Tech E&O can step in. Whether it’s a software bug, system failure, or a missed deadline, this policy helps cover claims of negligence.

Example:
An IT consulting firm helps a client migrate to a new cloud platform, but misconfigures key settings, leading to extended downtime and revenue loss. The client sues for damages—Tech E&O could cover the legal costs and potential settlement.

2. Protection Against Financial Losses

Clients often sue not for physical damage, but for lost income or other financial harm. Tech E&O helps protect your business from these types of claims, even if they stem from honest mistakes.

Example:
A software developer releases an update with a critical error that crashes their client's ecommerce platform during peak shopping season. The lost revenue prompts a claim.

3. Intellectual Property Infringement

Many policies include coverage for unintentional copyright or trademark infringement in your work—something that can be easy to overlook in complex tech projects.

Example:
A developer unknowingly integrates third-party code with licensing restrictions into a client’s app. The rights holder files a lawsuit.

4. Data Breach and Cyber Liability

Some Tech E&O policies may include coverage for cyber events, like data breaches or accidental exposure of client data. This can overlap with standalone cyber insurance but is a valuable inclusion for many tech businesses.

Example:
A managed service provider (MSP) has an employee error that exposes sensitive client data, triggering notification costs, legal defense, and potential settlements.

5. Legal Defense Costs

Whether you’re found at fault or not, defending against a lawsuit is expensive. Tech E&O typically covers legal fees, court costs, and attorney expenses from day one.

Why Tech E&O Is Essential

• It's can oftentimes be a contract requirement. Many clients and enterprise customers require proof of Tech E&O insurance before signing a service agreement.
• It protects your business's future. A single claim—even if it's groundless—can be enough to financially devastate a small tech firm.
• It’s customizable. The coverage can be tailored based on the type of tech services or products you offer, so you’re not overpaying for irrelevant coverage or missing key protections.

Final Thoughts

Tech E&O Insurance is one of the most important coverages you can carry if you’re in the business of building, managing, or supporting technology. It not only protects your bottom line—it builds trust with your clients, gives you peace of mind, and ensures your business is ready to keep growing, even when things don’t go perfectly.

If you’re not sure whether your current policy includes Tech E&O—or if you’re looking to add this protection to your insurance portfolio—don’t hesitate to reach out. We can walk you through your options and help tailor a policy that fits your business.