Errors & Omissions Insurance What is Errors & Omissions Insurance?

Errors and Omissions Liability protects your company from claims if your client holds you responsible for programming errors, software performance, or the failure of your work to perform as promised in your contract. Coverage includes legal defense costs - no matter how baseless the allegations. Errors and Omissions insurance will pay for any resulting judgments against you, including court costs, up to the coverage limits on your policy.Coverage extends to both W2 employees and 1099 subcontractors, and can be worldwide in scope.

When is Errors & Omissions needed?

We generally recommend this coverage be at the foundation of every company’s insurance portfolio. Usually it is wise to purchase the coverage prior to product or site launch, or when you have customers. It can be a contract requirement from companies that you perform services for.

Why do I need Errors & Omissions?

Don’t Be Fooled. Professional Liability coverage is not provided by a Commercial General Liability policy. Commercial General Liability does NOT provide coverage for programming errors, contract performance disputes or any other Professional Liability issues. IT consultants and companies who have General Liability without Professional Liability (Errors or Omissions) coverage are taking a serious risk. It’s like a doctor practicing medicine without Malpractice insurance.

Mistakes Happen.

Every company messes up at some point. For example, you recommend to a client that they run a certain test of their system, after you did some extensive work on it. The client takes your advice, the system crashes, and they are unable to conduct business for a whole week. The client becomes enraged, calls his attorney, and looks to you for reimbursement.

Directors and Officers Liability Insurance

What is Directors & Officers Insurance?
Directors & Officers Liability provides financial protection for the directors and officers of your company in the event they are sued in conjunction with the performance of their duties as they relate to the company. Think of Directors & Officers Liability as a management Errors and Omissions policy. Directors & Officers Liability can usually include Employment Practices Liability and sometimes Fiduciary Liability. The former involves harassment and discrimination suits, and is where the majority of your exposure will be.Directors & Officers Liability is often confused with Errors & Omissions Liability. The two are not synonymous; Errors & Omissions is concerned with performance failures and negligence with respect to your products and services, not the performance and duties of management. Generally it is a good idea to carry both policies.

When is Directors & Officers needed?

When you assemble a board of directors, they will frequently make the requirement. Investors, especially Venture Capitalists, will also usually require that you show evidence of Directors & Officers Liability insurance as part of the conditions of funding your company. Also having employees opens management up to employment practices lawsuits.

Why do I need Directors & Officers?

First, claims from stockholders, employees, and clients will be made against the company, AND against the directors of the company. Since a director can be held personally responsible for acts of the company, most directors and officers will demand to be protected rather than put their personal assets at stake. Second, investors and members of your board of directors will not be willing to risk their personal assets to serve as a corporate director or officer, no matter how heartfelt their belief in your company.