Professional indemnity insurance

Professional liability insurance: Protecting what is important to you

Performing in an ever-changing industry, where new technologies are constantly revolutionising the way we do things, is no easy task. You have managed, not without obstacles, to build a business, but is it properly protected?

"It only happens to others"
Cybercrime is at its peak: from hacking to theft of personal information to security breaches. The risks to your business are real and significant, not to mention the fact that your challenges are many and varied, and a slip-up happens without warning. Did you know that a lawsuit and a conviction resulting from an injury caused to others in the context of professional services can result in costs in the six figures? The future of your business, in which you have invested body and soul, is at stake. An insurance policy will protect not only your company's assets, but also your personal assets.

Thanks to its expertise in the information technology sector, Lussier Dale Parizeau, official partner of the AQIII, is able to offer you a exclusive insurance program, meticulously assembled according to the requirements and particularities of the industry in which you operate.

Errors and Omissions Insurance

Errors and omissions insurance is one of the insurances offered by LDP that covers your professional activities. It means that the insurer will pay any sums that you are legally obliged to pay as a result of harm caused to others in the course of your duties. A programming error, faulty software, accidental deletion of files or system incompatibility are just a few examples of errors that can lead to legal action. By purchasing this insurance, you will be protected against allegations of error or omission, whether founded or not. All services normally rendered and related to the IT sector are covered.

This insurance is also a strong selling point to prospective clients, giving them peace of mind and confidence. Some even require it to deal with a consultant.

To each their own

If you are faced with a circumstance that could lead to a lawsuit, simply forward any documentation you receive (or a summary of the situation at risk) to your broker during the insured period. Your broker will take charge of the situation:

A claims adjuster will contact you to explain the various steps in the process.
Your insurer will pay all costs, whether the lawsuit is wrong or right. In addition, these bills will be paid in addition to the insurance limit if the lawsuit is filed in Canada.
Finally, if you are found guilty, the insurer will pay the costs of damages up to the sum insured.

In addition, the insurance program of LDP for AQIII members offers a shared deductible option whereby the insurer will pay half of the deductible payable.

Avoid the worst

If the imponderable happens, here are two tips to avoid the worst:

• As soon as you become aware of a situation that could lead to legal action, do not wait for the situation to escalate and contact your broker as soon as possible.
• Never admit responsibility to the plaintiff.

Concrete benefits for the IT sector

To illustrate the benefits of E&O insurance, here are some examples of claims specific to the IT sector.

• Programming error :

An online services company hired the Assured Employment Agency, which specialises in IT staff, to provide computer programming services. A simple programming error was made. As a result, several pages of the website were inaccessible. The employment agency received a claim for $100,000, and ENCON retained legal counsel to defend the agency.

The investigation revealed that, although the program did contain a programming error, the client did not suffer significant losses and overstated the claim. ENCON negotiated a favourable settlement and paid legal fees in the amount of $30,000.

• Software developer sued by a client in the US :

The insured software developer was retained by a client to develop and install point-of-sale computer software. The client commenced a $1,200,000 lawsuit against the insured software developer, alleging that the software did not function properly, resulting in lost sales and customers. ENCON retained counsel to defend the insured software developer in accordance with the worldwide coverage provided under the policy.

The investigation revealed that the defective software was the cause of the client's losses. A settlement was reached and ENCON paid $120,000 in legal fees.

• Software developer sued by a software distributor :

The insured software developer sold defective software to a software distributor who, in turn, sold it to its customer. The customer filed a $500,000 lawsuit against the software distributor for failing to properly design, implement and install the software and for failing to provide adequate training to the customer's employees. The software distributor in turn filed a claim against the responsible third party, the insured software developer, for the same amount. ENCON retained a lawyer to defend the insured software developer.

The investigation revealed that the software was indeed defective. A settlement was reached and ENCON paid $100,000 in legal fees.

• Operational losses :

The defendant, a website hosting company, had just upgraded its servers and transferred its website files to the upgraded version of its servers. In the process, some of the original files were deleted without a backup copy. The claimant, a golf club, claimed to have suffered damages as a result of the interruption and deletion of its website.

The amount claimed was $30,000 and a settlement was reached for $10,000. Although the defendant's deductible was $10,000 under the policy, he was only required to pay $5,000 due to ENCON's shared damage deductible option.

• Consulting on Enterprise Resource Planning solutions :

The plaintiff alleged that the software designed by the defendant, a consultant, was not compatible with its existing computer system and did not produce the results promised by the defendant. The plaintiff also alleged that the defendant made false and misleading statements and was negligent in designing the software.

The claim amounted to $125,000 and included a claim for punitive damages. Coverage for punitive damages is available under the Information Technology Insurance Program in jurisdictions where such damages are insurable under the law.

Focus on the essential

Although this insurance does not prevent you from being sued, the expertise of the insurer allows you to practice your profession with complete peace of mind and to focus on what matters most: customer satisfaction.

LUSSIER DALE PARIZEAU  (LDP)

Did you know that ...
The terms "professional liability" and "error and omission" mean the same thing? Either term can be used in the insurance industry. Both terms are used to cover economic risks (especially the risk of loss), as well as possible compensation due to client dissatisfaction.