E&O is a type of professional liability insurance. It protects your company if mistakes and oversights occur. Since mistakes and oversights are more likely to occur during periods of rapid growth and extensive innovation, E&O insurance is important. The risk of E&O incidents is particularly high for SaaS companies right now.
The global SaaS industry is anticipated to be worth $10 trillion by 2030. As the sector grows and diversifies, emerging technologies are becoming more common. Despite the wide variety of specialties, every SaaS company requires technology errors and omissions insurance.
E&O is a kind of professional liability insurance. It safeguards your organization from mistakes and oversights. Mistakes and oversights are more likely to occur during periods of rapid development and cutting-edge innovation. You, as a SaaS company, are at high risk of E&O right now.
4 Types of Tech E&O lawsuits.
There are various liability risks faced by SaaS companies, including defects in product or service performance. For example, major downtime could result from technology product glitches or service outages, resulting in lost business and reputation for your customers. If a client suffers a financial loss as a result of your product or service, your E&O policy would protect your business by providing legal defense coverage.
Data and sharing complexities are other E&O risks. SaaS has enabled us to collect and store more data, but data management and protection have become more difficult. New laws, including the GDPR and the California Consumer Privacy Act, restrict how data can be used and shared. Non-complying SaaS companies may be penalized heavily.
A security breach or cyber-attack is also a risk for SaaS companies. According to the Breach Level Index, over six million records are lost or stolen every day. SaaS companies handle sensitive data and must safeguard it. Unfortunately, hackers continuously devise new strategies and simple human error can also lead to security issues.
You may be involved in expensive lawsuits when something goes wrong. Here are some of the E&O claims you might encounter:
1. Failure to perform or breach of contract
Inadequate delivery of a service or product may result in a lawsuit, whether it is caused by technical problems or other issues.
2. Negligence
An employee might unintentionally send an email containing sensitive information to the wrong person, for example, or leave a laptop in the wrong place. When it results in financial loss or data breaches, human error can serve as the basis for legal action.
3. Theft of Personally Identifiable Information (PII) and failure to prevent the introduction of malicious code
A cybercriminal who infects your software with a virus and uses it to steal names, addresses, social security numbers, and other types of PII. Your SaaS could be held responsible for failing to prevent it.
4. Copyright infringement
Using copyright-protected code or software can be a difficult and expensive legal battle if you are a SaaS company. Another company may also steal your software, resulting in a similar problem. You’ll have to file a lawsuit to defend your rights, and that process might be time-consuming and expensive.
5. Defamation in online content
A lot of SaaS products allow user-generated content, such as reviews and comments. If this content is libelous, you may be held responsible. Likewise, if the defamatory online content of another company causes damage to your company, you may have to file a suit to recoup your losses, you might want to consider filing a lawsuit to recoup your losses.
E&O Cases Can Play Out In Several Ways
Let’s look at an E&O claim situation in SaaS to see how it would play out. A SaaS company that produced medical billing software wanted to link the data of a large pharmaceutical supplier across a bunch of networks. It hired a company specializing in linking data across multiple platforms.
When the pharmaceutical company needed their data, it was found that the software had malfunctioned and erased over 30% of the records, resulting in fines and losses of over $2.8 million. The pharma company was awarded $3 million in damages, as well as punitive damages, after a trial. Both the SaaS company and the data consulting company were sued.
In 2010, Oracle filed a lawsuit against Google, claiming that Google’s use of Java APIs violated a Java patent. Google argued that the APIs in question should be considered as part of a fair use doctrine.
Oracle was awarded by the United States Court of Appeals for the Federal Circuit in 2018. Google is seeking more than $8 billion in damages, while Google is appealing to the Supreme Court of the United States. Both parties have wasted considerable resources over nine years of court litigation.
How Technology E&O and Cyber Liability Insurance Policies Work Together.
If you’re wondering about the differences between Tech E&O and cyber insurance policies, the first thing to understand is that you should have both.
Combining policies into a bundle with one insurance company is beneficial because of coverage overlap. However, both policies are crucial. By doing so, you may control your costs by avoiding coverage gaps and establishing clear coverage boundaries.
Considering how widespread and diverse cyber risks are, identifying whether a loss is covered by Tech E&O or Cyber Liability insurance can be challenging. If both are provided by the same insurer, the chance of a claim being denied is reduced.
How Technology E&O and Cyber Liability Insurance Policies Work Together.
The SCAC reports that SaaS is the most sued industry. Don’t fool yourself into thinking that you won’t be sued at some point; rather, prepare for it.
The amount you pay for Tech E&O coverage will depend on several factors.
When you’re looking at your Tech E&O policy, you should also consider the insurer’s financial strength (A.M. Best Rating) as well as the carrier’s experience in your industry. Cost is not the only factor that matters.
SaaS companies should also consider purchasing policies specifically for technology risk. The SaaS industry is constantly innovating. Tech E&O policies are designed to keep up with the SaaS industry’s developments.
It is also crucial to recognize what is and what is not covered. In many cases, Tech E&O policies do not cover certain claims as they are already covered by other types of insurance. For example, general liability and property insurance cover bodily injury and damage, respectively. While general liability and property policies will not cover certain types of claims, such as delays or contract breaches.
Cover Your SaaS understands the risks and how to best place a Tech E&O and Cyber policy to cover your SaaS company. We would be pleased to assist you in finding the best policy for your SaaS.