You are in danger and you are alone. You don’t have to be.
The emerging landscape of tech and media firms has grown exponentially over the last 10 years, with the digital sector contributing close to £150bn to the UK economy. The new “tech” boom is growing 2.6x faster than the UK’s GDP and doesn’t show any signs of slowing down.
However, such huge growth also brings new challenges and risks.
Professional Indemnity (PI) insurance exists because mistakes happen. No profession is immune to this.
Many problems are rectifiable. It may take hard work and impact the profitability of the project but it gets fixed. However, this can engender false confidence that all problems can be fixed in the same way, and that PI insurance is an unnecessary overhead.
The reality is that some problems are more resistant to rectification, or that there are additional ramifications due to the impact of the problem on the client’s business. Contractual exclusions and caps on liability are not watertight; holes in the drafting of clauses are regularly identified, and the finest worded clause is nevertheless subject to the Unfair Contract Terms Act, and may be struck out in a particular instance.
Clients cannot be relied upon to always be reasonable and some have an adversarial approach to business; they may be quick to exploit the commercial opportunity of an issue and the legal liabilities consequent on that problem. This is only underlined if a claims management company gets their hands on the issue.
The commercial necessity of PI insurance for technology companies has become more apparent than ever, and the clients themselves are increasingly looking for the reassurance that their professional firm is backed by insurance.
There is substantial diversity in the cover offered by different PI policies, and it should not be assumed that they will deal with all problems without further investigation. It is important to understand the cover offered by a particular policy, and take advice on this where appropriate.
Amongst other insuring terms, it is common for the better Tech PI policies to cover you for specific forms of breach of contract, as well as negligence.
Breach of contract
Repeat business from clients is the cornerstone of successful technology firms, providing a steady stream of work whether this is in the form of updated software packages, the creation of new databases and websites, or the maintenance of a company’s system.
It is important to remember that the foundation of these services are requirements set out in your contract with your client. If your firm fails to meet the requirements and service standards within the contract and that failure would cause a loss for your client, you may be liable for breach of contract.
The higher end PI policies tailored to technology firms are designed with this occurrence in mind. Breach of contract cover should not be assumed however as many PI policies exclude onerous liability accepted in a contract. Examples of liability considered “onerous” would be warranties, indemnities and other guarantees of a particular outcome.
In the event of a large claim and the 6-figure defence costs bills often attendant on legal action, a tech firm could have a PI policy behind them to ensure peace of mind in what may otherwise have been a costly and extremely stressful situation.
Things go wrong, this is a fact of life. You could be the greatest software engineer, the most adept technician or the best project manager, but mistakes will still happen. The question is – how costly will those mistakes be?
In UK law, mistakes and omissions which fall below the standard of service that a firm should be giving (as understood by the courts!) – is described as “negligence”. If your technology firm were to fail in carrying out its services, and especially if those services were central to the daily operation of your client, the damages arising could be catastrophic.
PI cover is not solely about paying damages in the event of a successful claim, and its second function is often overlooked. PI policies also provide cover for defence costs and a PI policy can help fight off a claim. A stubborn claimant can be persistent in pursuing a claim, even if an objective and educated observer would think that their claim was without foundation. Such matters can run up substantial costs in terms of defending them, dealing with court applications and so on. A PI policy mitigates these costs and transfers the risk to the insurer rather than the firm.
In a world where some form of technology is used in the operation of over 90% of businesses, it’s imperative that the companies behind the technology are protected.
At Brunel Professions, we have a dedicated technology team to help place all manner of tech, media or FinTech risks that you may wish to insure. This team is headed up by myself, Harry Bush.
If you would like to find out more about the many ways PI could help protect your firm, or to consider the ways in which claims might arise from your own services, please do not hesitate to get in touch with me:
Phone number: 0117 325 0958