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Risk In Context

Directors and Officers Liability in the Technology Industry

Posted by Lydia Alexandra 01 July 2019

Professionals in the Information Technology industry are inherently exposed to unique liability risks as a result of the work that is provided. Many IT firms provide both goods and services to their clients, but there is some ambiguity around the work IT professionals provide, as to whether software advice or development is classified as a good or service. Clients’ demands and expectations are ever increasing, so it essential that professionals produce and provide high quality work as agreed. As a result of these factors, liability claims in the IT industry are often complex, and can be costly should they arise.

Further complicating the industry, IT organisations could also be liable for damages in relation to breaching intellectual property rights. In a rapid pace environment that is always innovating and evolving their service or product, often relying on various capabilities and talent, this is a very real threat.

In fact, a company that distributes training software was recently sued by a software developer, who claimed that the distributer hired a former programmer who had stolen source code and used it when developing the competing product.  The programmer was sued for breach of confidentiality, with the developer seeking damages from its rival for breaching IP rights. An injunction was also granted to prevent any further sales of the competing product.

In this instance, the developer had an Information Technology Liability Policy. This offers the developer protection through their policy to fund legal costs arising from the allegation. While it is unclear whether the other parties involved held the relevant insurance, they would have also benefitted greatly from an Information Technology Liability Policy, which may assist with the cost of legal defence and settlement payouts, should they be awarded.

However, Information Technology Liability Policy provides much more to developers and other IT professionals. Given the complex nature of the industry, such policies are often a package of professional indemnity, public liability and product liability. This combined policy, specific to the IT sector may provide protection for:

  • Any loss or damage resulting from the installation or supply of the goods you have provided
  • Any loss or damage resulting from the services you have provided
  • Any loss or damage resulting from the advice you have provided
  • The goods or services you have provided do not work as intended or fail
  • Losses relating to intellectual property infringements
  • Legal costs associated with relevant allegations

Professionals in the multifaceted IT industry are exposed to a complex array of risks. For more information on Information Technology Liability or to arrange a quote, please get in contact with our specialised team Marsh. 

 

 

Marsh Pty Ltd (ABN 86 004 651 512, AFSL 238983) arrange insurance and are not an insurer. Any statements concerning legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as legal advice, for which you should consult your own professional advisors. This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy.  Marsh makes no representation or warranty concerning the application of policy wordings or the financial condition or solvency of insurers or re-insurers. Marsh makes no assurances regarding the availability, cost, or terms of insurance coverage.

LCPA: 19/050

Lydia Alexandra

Principal, VP – Financial and Professional Practice