Technology Errors and Omissions Insurance

The Difference Between General Liability and Tech E&O

Comparison Table: General Liability vs. Technology E&O

This distinction is why firms like Bloc Cyber place tech E&O at the insuring-agreement level rather than bundling it as a checkbox on a general liability form. The coverage grant, exclusions, and sublimits need to match your actual service delivery model.

When Software Development Goes Wrong: Negligence Claims

Negligent software development claims arise when a client alleges that your work fell below the professional standard of care. Examples include deploying code with known security vulnerabilities, failing to test a migration before pushing it to production, or delivering an application that does not meet documented specifications. The claim does not require intentional wrongdoing. Negligence is enough.

A 2024 study found that cyber insurance claims severity dropped 50% on average, but threats are increasingly targeting smaller companies. For a 50-person development firm, even a moderate negligence claim of $200,000 to $500,000 can be existential without insurance. Defense costs alone in a technology professional liability suit routinely exceed $75,000 before any settlement discussion begins.

Failure to Perform: Meeting Functional Requirements

Failure-to-perform claims differ from negligence in an important way: the client is not necessarily alleging that you did the work poorly, but that you did not do it at all, or that what you delivered does not function as contractually required. A common pattern involves a client paying for a platform build, the project running over timeline and budget, and the final product missing critical functional requirements outlined in the statement of work.

These claims often hinge on contract language, which is why your policy form's treatment of contractual liability matters. Some tech E&O forms exclude breach-of-contract claims entirely unless the breach would also constitute a negligent act or omission. Others provide broader contractual coverage. The difference between those two forms can determine whether a $300,000 claim is covered or denied.

Missed SLAs and Financial Penalties

Service level agreements typically specify uptime guarantees, response times, and resolution windows. When you miss an SLA, the contract usually triggers financial penalties: service credits, fee reductions, or liquidated damages. Whether your tech E&O policy responds to these penalties depends entirely on how the policy form defines a "claim" and whether it treats SLA penalties as covered loss.

Many policy forms exclude liquidated damages or contractual penalties from the definition of covered loss. Others include them but subject them to a sublimit. A company running a managed services operation with 99.9% uptime commitments across 40 clients should know exactly how its policy treats SLA exposure before a widespread outage triggers simultaneous penalty demands. Technology companies with complex service delivery models need this level of form-level review.

Contractual Liability and Indemnification Clauses

Indemnification clauses in your client contracts can expand your liability well beyond the scope of the original project. If you agree to indemnify a client for all losses arising from your services, including their downstream losses and legal fees, you have accepted a contractual obligation that your tech E&O policy may not fully cover.

Some policy forms contain "contractual liability" exclusions that void coverage for liabilities you assumed under contract that you would not have had at common law. This is one of the most overlooked gaps in technology professional liability. Before signing a contract with broad indemnification language, compare that language against your policy form's exclusions. This is exactly the type of pre-binding review that Bloc Cyber performs: reading the form, identifying where the coverage grant stops, and telling you what that gap will cost before a claim finds it.

FAQ: Do I need Tech E&O if I have a solid contract?

A well-drafted contract helps, but it does not eliminate your exposure. Contracts can limit liability, but they do not prevent lawsuits. Defense costs alone can exceed $100,000, and a contract's limitation-of-liability clause may not hold up in every jurisdiction. Tech E&O pays for your defense regardless of whether the claim has merit.

FAQ: Does this cover me if I get hacked?

No. A data breach or cyberattack is a cyber liability exposure, not a technology E&O exposure. You need a separate cyber liability policy form to cover breach response, notification costs, regulatory defense, and third-party claims arising from a security incident. Many technology companies carry both policies because the exposures are distinct.

FAQ: How much coverage does a small startup typically need?

Most startups with 10 to 50 employees and annual revenue under $5 million carry $1 million to $2 million in tech E&O limits. The right amount depends on your contract obligations, client size, and the potential downstream impact of a service failure. If your largest client requires $5 million in coverage via their vendor agreement, that contract drives your limit decision.

FAQ: Will my policy pay for my own lost profits?

Tech E&O is a third-party coverage. It responds to claims made against you by others. It does not cover your own lost revenue, your own business interruption, or your internal costs to fix defective work. Some policies include a limited "mitigation of loss" provision that may cover costs you incur to prevent a third-party claim from materializing, but this is not the same as first-party loss coverage.

Cyber Coverage Built for Your Industry

Every industry faces a different cyber threat, from patient records in healthcare to wire fraud in construction. Bloc Cyber matches coverage to the risks your sector actually faces, drawing on specialty carriers that understand your business. Find your industry below to see how we protect it.

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