Why do you need IT Liability insurance?

Legal uncertainty exists over the character of some of the activities provided by IT consultants. In providing software advice and/or design, are they providing a service or a ‘product’? Understandably, the uncertainty has caused confusion in the handling of claims. Should the claim be treated as a ‘service’ and therefore be covered under a Professional Indemnity policy? i.e. the claim arose from a breach of the Insured’s professional duty. Alternatively, should the claim be treated as a ‘product’ under a Public & Products liability policy i.e. the claim arose out of a product or manufacturing fault?

The IT Liability Insurance package provides the convenience and benefit of both a Professional Indemnity and a Broadform Liability Insurance policy in one. The Package provides cover for both civil liability arising from the conduct of the Insured’s professional business practice and third party loss caused by bodily injury or property damage. A traditional Professional Indemnity policy is not suitable for an IT consultant as they contain ‘sale and supply exclusions’. The policies within this package are specifically tailored for IT consultants.

You may feel that because your work is supervised by others, you do not need IT Liability Insurance, but you should consider this:

• Defending a claim of “negligence” usually involves seeking specialist legal advice and costs can very quickly mount up. You could expect to pay, for your own legal costs alone, $15,000 per day should the claim end up in Court. On this basis, the cost of defending a claim can very easily become a financial nightmare for the uninsured professional person.
• Contracting IT professionals have been held to be negligent even though their work was supervised by the principal by whom they were engaged.
• Everything an IT consultant does and says in the course of their business could result in a professional liability claim. In the present climate, spurious claims of negligent advice are being made with the aim of delaying the payment of professional fees. You might know that the claim is spurious, but you still may need to defend it. Remember, Civil Courts operate on the balance of probability principle, rather than the level of proof required in Criminal Courts.