IT Liability – Whitbread Insurance Brokers

IT Liability

More than ever before, Australian businesses rely on Information Technology and Telecommunications professionals to operate in the modern world.

Information Technology (IT) Liability insurance provides IT professionals with financial protection if you fail to deliver the contractually agreed upon products and services to your clients. Legal action is becoming increasingly common, and if you are deemed or alleged to be liable, losses to your business could run into tens of thousands of dollars.

IT Liability insurance combines both Public Liability and Professional Indemnity insurance into one policy, exclusively for IT professionals.

It has been designed to provide cover in the event of a claim such as:

Contract breach where you have failed to perform or complete work as set out in a contract.
Professional Indemnity where legal expenses and compensation is owed to a client in the event you are found liable for financial loss as a result your professional advice or paid service.

IT Liability insurance also extends to cover your business operations as a whole, giving you the confidence to plan ahead with certainty and grow your business.

Please Note: Below are some of the more common insurance policy features, however, the list is not exhaustive and some features may not be offered by certain insurers. Please refer to the insurer-specific policy wording for inclusions, exclusions, terms and conditions.

Covered Features

Packaged Policy

Combines Public & Products Liability as well as Professional Indemnity Insurance into the one policy.

Public & Products Liability

Provides cover for damage to property or personal injury caused by your negligence or products.

Copyright or Trademark Infringements

Covers the inadvertent use of another company’s trademark.

Loss of Documents

Covers damages suffered by a third party as a result of the loss of documents, including electronic documents.

Professional Indemnity

Covers financial injury suffered by a third party arising from an error, omission or failure to perform, sometimes including protection for both performance based contractual liability and liability assumed in contract.

Claim Costs

In the event of a potential claim, some insurers will advance claim costs to mitigate a loss as well supplying expert advice.

FAQ's:

How do I determine the required sum insured?

There are usually different limits for both the Professional Indemnity and Public/Products Liability Sections of the policy. These are usually determined by the contract you have entered which may have specific minimum limits as a pre-requisite.

It is important that these limits adequately cover the actual exposures to your business. Limits of Indemnity can range from $1,000,000 to $20,000,000 for Professional Indemnity and from $5,000,000 to $50,000,000 for Public and Products Liability.

This is a “Claims-Made” policy, what does that mean?

The Professional Indemnity section of the policy is under a “Claims Made” policy wording, this means that you must have a current policy in place on the day that you are made aware of a claim or circumstances that may lead a claim.

If a policy is allowed to lapse, you will not have any cover in the future for any actions taken against you for errors or omissions in the past. The Public Liability Section of the policy is ”occurrence based”, which means that a policy has to be in place on the day the incident from which the claim arises.

What is Run-Off cover?

In some contracts, Run-Off cover for a designated period may be required. This can often be up to a period of 7 years. This means that your client wants you to have a policy in place for a minimum of 7 years after the contract has finished and this is because of the Claims Made policy wording.

Sometimes it can take many years for a defect to be noticed and traced to the source and a third party can make a claim against you for something that took place years ago.

All business should also consider taking out run-off cover once the business has stopped trading, as the claims can still come in years later and there is no cover unless you have a current policy.

What is a retroactive date?

This is the date from which you are covered and should either represent the date your company started trading or the date you first took out insurance. Some insurers will even give you an ‘unlimited’ retroactive date.

When changing insurers, it is vital to advise your new insurer of the retroactive date you have with your previous insurer, otherwise you could end up with a new date and you may not be covered for any potential past liability.

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