General Liability and E&O . . . NOT Interchangeable
We are focusing our discussion in this article on technology companies. However, much of the information applies to businesses that provide professional services.
Some technology companies have either general liability coverage OR an errors & omissions policy. However, both are extremely important to ensure the proper coverage for businesses in the technology (among other professional services) industry. Here is why:
General Liability:
General Liability provides two primary coverages: bodily injury and property damage, either arising from your products, services or operations. However, it often DOES NOT cover:
- Electronic data and media property losses, for example.
- Economic losses, such as a product causing the loss of customers.
- Product recall costs, which must be added by endorsement or through a separate policy.
- Generally speaking, professional services and/or advice, and any resulting liability, will be excluded.
- Personal and advertising injury specifically for new media, which is expanding to include more and more companies as the technology industry evolves.
Errors and Omissions:
Technology E&O, or Professional Liability, is often overlooked or purchased only when required contractually. But, it is a critical coverage that every technology company should obtain. It is also critical that you work with an insurance agent with an expertise in the technology industry and its coverages, as there is no standard form and policy comparisons are extremely difficult for the general public.
At the most basic level, E&O policies are intended to cover economic loss liability and damages to tangible and intangible property not associated with physical injury. Generally speaking, E&O will not provide coverage for bodily injury, property damage, or personal and advertising injury. It is important to remember that E&O coverage only applies to damages arising from technology products or services, while a GL policy normally covers damages resulting from all products, services and operations.
Rather than obtaining either a General Liability policy or E&O insurance, it is best for a company to purchase both coverages so that coverage gaps, which might otherwise exist, are closed.
There are other ways Technology E&O differs from a General Liability policy, including:
- Claims reporting periods.
- Deductibles usually apply to E&O policies, but not GL policies.
- Whether defense costs reduce the limit of liability on the policy.
- Does your E&O policy exclude dishonest acts with no exception for “innocent insureds”? If yes, consider removing this exclusion from your policy.
In addition to the liabilities and losses mentioned above, technology companies also face risks from cyber space claims, network security concerns, privacy allegations, infringement and media liability allegations, etc. While not necessarilly addressed by a Technology E&O policy, these exposures can be covered through endorsements.
The most important take-away from this information is that you need an insurance agent with technology expertise. The more capable your agent is at understanding your business, the more able they will be to secure you appropriate coverage. And a Trusted Choice independent agency is able to quote with multiple insurance companies specialized in your type of risk to ensure not only the best coverage but at the best price.
In addition to his insurance experience, the founder of Keystone Insurance Services, Inc. has an M.S. in Nuclear Physics and has fourteen years experience in technology fields. We are your technology insurance expert. Call us today for a free, no obligation, review of your company’s coverage.
Keystone Insurance Services, Inc. Blog 
It’s difficult to convince a business owner that they need both coverages to completely protect their business. Who would blame them in this economy? Still, however, it’s important for the agent to make it clear to the insured that with only a few dollars more, they would get complete coverage.
Duramerica Insurance Brokerage
July 29, 2011
Thank you for your comment! Your point is well-taken. The recession has made this increasingly difficult. However, I’m sure you would agree insurance is NOT the place a business owner, much less a small business owner, wants to inadvisably cut costs. If you are lucky enough to experience growth in this economy, we recommend placing a priority on protecting that growth.
Keystone Insurance Services, Inc.
August 5, 2011