From managing workflows to keeping assembly lines running smoothly, software systems power big business. And when something goes wrong with that software, the costs can add up quickly - especially when the software is powering machinery that produces components for larger projects. Several industries that come to mind include aerospace, automotive, electronics and defense contracting.
When software causes production to shut down for a single component, it doesn’t just cost that business money...it can also affect other businesses that rely on those parts. Even a few days of delays can cost millions, and if it happens more than once, it could easily lead to the cancellation of very lucrative contracts. And, if the software causes damage to parts of materials, the software company could be responsible for that too. These are just a few of the reasons why it’s so important for software manufacturers to carry product liability insurance.
Assessing Liability Risks for Software Products
Of course, understanding how to write technology errors & omissions insurance for software can be tricky. How much coverage is needed will depend on who is using the software, and what they are using it for. It may also depend on whether the software company is also responsible for related hardware, and any other services they provide such as programming, security, maintenance or patches.
If a software company, or a company that uses their software is awarded a government contract that could also dramatically change the software company’s potential technology exposure, just like any contract with a major manufacturer would. And, if the software is used by government contractors, there could also be additional issues pertaining to classified processes.
Then there’s the programs themselves, how they interface with the machinery, and how susceptible they are to errors or corruption. All of this is highly technical stuff that most insurance brokers don’t know a whole lot about, which can make assessing insurance liability risks rather difficult.
Understanding When a Software Company is Liable
If assessing insurance risks for software companies requires a lot of technical expertise, understand when a software company may be liable for damages is even more difficult.
The physical damages or cost in delays require complex calculations, but the real expertise comes in figuring out whether the software company is liable at all. It may not always be easy to tell if a malfunction was caused by software or hardware, or if there was some human error in programming involved that the software company is not responsible for.
With so much to consider when writing and managing personalized technology errors & omissions insurance policies for software companies, it helps to have an underwriter with expertise in the software industry to guide you.
Need A Tech E&O Insurance Underwriting Partner?
At Admiral Insurance Group, we have a deep expertise in working with companies that provide software products to government agencies, major industrial manufacturers and other businesses. Working with our wholesale and retail broker partners, we create accurate risk assessments and provide insurance policies that make sense for these companies, who often have billions of dollars in economic activity relying on them.
If you are a wholesale broker interested, contact us about becoming a premier partner. If you are a retail broker with clients in the software and technology industry, locate a wholesale broker partner.
Products and services described above are provided through various surplus lines insurance company subsidiaries of W. R. Berkley Corporation and offered through licensed surplus lines brokers. Not all products and services may be available in all jurisdictions, and the coverage provided by any insurer is subject to the actual terms and conditions of the policies issued. Surplus lines insurance carriers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds.