The ability to build and maintain strong relationships with business partners and vendors is an essential requirement for any business seeking long-term success. This is especially true in the fast-paced technology sector, where a company’s ability to put its innovative ideas to work often depends on its access to outside capital and its skill in turning connections into contractually-bound partners, vendors, clients, and customers. The unfortunate corollary to the need for technology firms to build and maintain relationships with outside partners is, of course, that no relationship is perfect. Not all partnerships are built to last. That reality raises an all-important question: how do you prepare your firm for the inevitable day when one of its business relationships sours?

As my colleague Linda Powell discussed recently, firms that provide technology services and products can manage their relationship-based risk by purchasing Technology Errors and Omissions (Tech E&O) insurance. Alternately known as Technology Professional Liability Insurance, Tech E&O insurance is likely to respond to demand letters, claims, or lawsuits brought against your firm by dissatisfied business partners, vendors, or customers who believe that your firm has committed an error or made an omission that caused financial harm. Continue Reading When Business Relationships Go Bad: Maximizing Your Technology Professional Liability Coverage for Breach of Contract Claims

Wildfires have wreaked havoc on, and caused incalculable losses to, individuals and businesses in California over the last three years. These disasters—caused by a series of conflating events, including massive shifts to the climate—are not limited to the Golden State, as fires have devastated many western communities, and fires as well as other unprecedented weather events, including hurricanes, flash flooding, cyclone rains, and extreme-cold freezes have disrupted businesses across the world.

Most businesses know how to protect their physical offices and facilities with commercial property insurance, including business interruption coverage, in case they are directly affected by physical disasters. But, in today’s business environment, a company may be closely tied to and dependent on third-party suppliers. What happens if a major player in your supply chain is adversely affected by one of these (unfortunately) all-too common climate disasters? Unless you operate at ground zero in vulnerable environmental zones, you may not be aware of the fact that your vendors may be the ones most directly affected, and this might have a devastating ripple effect on your ability to operate a successful business. Continue Reading Are Climate Events Threatening Your Supply Chains?

Most firms that provide technology services or products have insurance to protect them against the risk that a dissatisfied customer will bring a claim or a lawsuit against them for damages arising out of the company’s products or services. It is very likely that such firms purchase general liability insurance, which is an important product that covers many different risks, including property damage, bodily injury, advertising injury, and other business-related claims. Most importantly, general liability insurance policies often require the insurer to defend the company in the event of litigation, making it a particularly valuable type of insurance. But will general liability insurance protect your tech company in the event of a claim by a client for purely financial damages? The short answer is, probably not. This is the reason for tech firms to consider a Technology Errors and Omissions (Tech E&O) policy as part of their overall coverage program. Using the examples below, this article discusses the coverage such policies can provide.

Example 1: Tech Product

Let’s say your company designs and provides building design software to architecture firms. Due to a problem with your software, several architectural designs for major projects have incorrect specifications, which impact many large projects. As a result, your company’s clients lose revenue because they have to revise the design plans for these projects, which takes additional weeks of architect time. If the architects then sue your company for damages, it will have to defend itself in the lawsuit and possibly pay a settlement or judgment to the architecture firms.  Continue Reading Technology E&O Insurance

As the risks associated with cyber liability continue to evolve, so do the insurance products that are theoretically meant to protect against those risks. As the insurance industry attempts to keep pace, the applications that insurers are using to capture the data they believe is necessary to underwriting these risks are also evolving and vary to a large degree. Regardless of whether an application is long or short or seeks information in generalities or in detail, all prospective policyholders must take care in completing these applications, enlisting the help of a data security professional (whether within the organization or a consultant) and possibly of a good broker that specializes in this area. Indeed, a failure to provide accurate information could cause an insurer to resist providing coverage for a claim, or attempt to rescind the policy, on the purported grounds that there was a material misrepresentation in the policy application.

This article first provides an overview of the key categories of information that most cyber-liability insurance applications seek, followed by some of the key principles of which a policyholder should be aware in the event an insurer attempts to deny a claim or rescind a policy based on alleged misrepresentations or omissions in the policy application.  Continue Reading Filling Out a Cyber Insurance Policy Application: Do Not Give Insurers a Material Misrepresentation Defense

Data breaches are up significantly in 2019, exposing billions of confidential records and costing companies millions of dollars on average per breach. Security experts counsel their clients that data breaches are inevitable as even the largest, most secure systems may be breached. In spite of this environment, many tech companies are woefully unprepared to respond to a cyber intrusion, data breach, or other cyber-related event. Are you ready?

As insurance coverage lawyers, we often work with clients to confront this organization-wide challenge after a breach has occurred. The better approach, however, is to prepare in advance by understanding your risks, building a team, securing and monitoring your data, having a well developed and rehearsed response plan, and tailoring your insurance program to a possible breach. Additionally, having counsel involved throughout the preparation and response process is critical to protect privilege, minimize legal liability, and maximize insurance coverage.  Continue Reading Preparing for Data Breaches: Data Mapping, Response Team and Insurance

This author has previously discussed the inevitability of security hacks and attempts to require companies holding third-party data to pay some type of damages to the alleged victims of a hack. Even though damage from such hacks is often hard to prove, those who claim to have been victimized and their lawyers, who often operate on contingencies, will continue to file lawsuits that often result in the imposition of at least defense costs and, at times, of some indemnity payments. Hacked companies also suffer actual damage from loss of customers when the hacks are reported as required by multiple laws. Companies should thus take reasonable precautions against data breaches. But if a company takes such reasonable precautions, it should be able to buy insurance for the inevitable hack that actually provides coverage for resulting defense expenses, indemnity payments, and loss of business income. Continue Reading Watch Out for the Statutory/Governmental Exclusion and Any Restriction on Paying Ransom Demands for Malware Attacks

Why is this technology so exciting?

The National Highway Traffic Safety Administration (NHTSA) has noted that 94% of auto accidents are attributed to some form of human error on the part of drivers. In 2014, there were an estimated 1.25 million deaths worldwide due to vehicle crashes. There is a potential for autonomous vehicle technology to dramatically re-shape these statistics. The Insurance Institute for Highway Safety anticipates that there will be 3.5 million self-driving vehicles on US roads by 2025 and 4.5 million by 2030. Continue Reading Self-Driving Cars Coming to a Store near You!

Your company receives a demand letter and you realize that the claim stems from a vendor’s product or service. What do you do next? The first step for most companies will be to review the operative contract for any indemnification provisions. Next on the list will be to review any certificates of insurance issued by the vendor. All too often, however, companies at this phase learn that they were never actually added as additional insureds to their vendors’ policies or that their vendor’s coverage is inadequate. Continue Reading Issues With Vendor Certificates of Insurance

Companies enter an array of technology transactions with third-parties that allow vendors access to the Company’s source code, customer data, employee information, cybersecurity measures, and other critical data and infrastructure. These relationships inevitably increase the potential of a cyber attack impacting the Company through an attack against the vendor. Continue Reading How Does Your Company Transfer Risk in Its Technology Transactions?

A merger, acquisition, or other corporate transaction can raise a number of issues for the insurance coverage of the parties involved.  The transaction may affect the parties’ current coverage and their rights under their historic policies.  The parties will want to specify clearly the intended interplay of other aspects of the deal, such as indemnities, with available insurance.  And the parties may wish to consider purchasing various types of insurance for aspects of the deal itself. Continue Reading Insurance and Mergers & Acquisitions