Tech Errors & Omissions
Technology drives most cannabis companies’ success in the modern world. If a tech issue arises, such as a newer software causing a third party’s older system to crash, liability becomes a massive problem. Tech E&O, usually teamed with cyber liability, covers legal fees and other related costs in the event of a lawsuit.
Who is Tech E&O Insurance for?
Most businesses run on technology, sometimes meaning a seemingly tiny tech glitch can snowball into a costly problem. It’s not uncommon for a company’s technical failure to cause significant third-party financial loss. Consider a new product that isn’t compatible with a client’s older system, for example. Crashes could occur, and businesses could lose out on profits. However, traditional professional liability insurance doesn’t always cover tech-related losses.
As a result, tech errors and omissions (E&O) insurance typically teams with cyber liability to offer the most well-rounded liability coverage available for tech companies. Tech E&O protects your company should someone accuse your digital product or service of being substandard. It also frequently offers liability coverage regarding media, security, intellectual property, and personal injury.
If your cannabis company performs a professional service for another party — consulting, marketing, developing, processing, advising, managing, reporting, or other functions — you risk another party claiming they suffered a financial loss due to a failure in your service.
There is an option for an E&O/Cyber blended form for tech-enabled companies.
Software as a service (SaaS) for cannabis companies is a unique vertical, including inventory management systems, temperature control systems, online purchasing systems, education platforms, etc.
Why you need Tech E&O Insurance?
Protects against financial damage caused by technical issues.
Covers legal fees surrounding substandard services accusations
Protects against third-party claims (i.e., system glitches, backup failure)
What does Tech E&O Insurance cover?
Tech E&O protects your company should someone accuse your digital product or service of being substandard. It also frequently offers liability coverage regarding media, security, intellectual property, and personal injury.
Tech E&O covers the financial loss of a third party arising from the failure of the insured’s product to perform as intended or expected.
This policy covers the financial loss of a third party arising from an act, error, or omission committed in the course of the policyholder’s performance of services for another.
Tech E&O also frequently offers liability coverage regarding media, security, intellectual property, and personal injury.
Tech E&O Insurance Enhancements
Tech E&O Insurance Enhancements
Tech E&O Insurance
You own and operate a consulting service that helps teach people how to use medical marijuana for pain management. A client suffers an adverse reaction to cannabis and claims their reaction directly results from your consulting. Since there is no actual product being sold, E&O insurance would step in to protect your company from the lawsuit.
Breach of Contract
A lawsuit may result if your company promises a service or product and doesn’t deliver. Unexpected technical difficulties or other issues could cause this.
A medical billing company hired a software company (specializing in providing software to integrate data across multiple platforms) to integrate its data across several networks. The data consisted of the Medicare billing records of a large pharmaceutical distributor. When the pharmaceutical company needed access to their records during a RAC audit, they discovered that the software had failed and had destroyed over 30% of the company’s billing records. The company faced fines and lost revenue of over $2,840,000. The pharmaceutical company sued both the medical billing company and the software manufacturer and was awarded $3,000,000 plus punitive damages at trial.
Tech E&O FAQ’s?
More often than not, the premium is a function of company revenue. Changes in revenue will often be the driving factor for increase or decreases in cost on renewal.
How carriers determine premium depends entirely on the industry, for example:
- Tech E&O policies may look at revenue in conjunction with monthly average users.
- Allied health/malpractice premiums will be guided by the number of covered care providers.
- A tour guide’s E&O policy may be rated on “hours”: hours per tour x number of customers per tour x number of tours per year.
Many other variables impact the cost of this coverage, such as:
- Claims history
- Policy limits