TECHNOLOGY LIABILITY

Technology companies face unique and evolving risks. A single coding error, system outage, or data breach can trigger costly claims, regulatory investigations, and reputational damage. As the Delta white papers highlight, the complexity of digital services, the prevalence of cyber threats, and rising client expectations mean that robust Technology Liability Insurance is now a business-critical safeguard.

What Is Technology Liability Insurance?

Technology Liability Insurance (sometimes called Tech E&O or IT Liability) is a specialist policy designed for businesses that develop, supply, or support technology products and services. It typically combines:

• Professional Indemnity (PI): Covers claims for financial loss arising from errors, omissions, or failures in your professional services (e.g., software bugs, failed implementations, negligent advice).

• Cyber Liability: Covers losses from data breaches, cyber-attacks, and privacy violations.

• General Liability: Covers third-party property damage or bodily injury (e.g., hardware causing fire or injury).

Key Exposures for Technology Companies

Based on the Delta white papers and current market realities, tech companies are exposed to:

• System Failures: Outages, downtime, or bugs that disrupt client operations.

• Data Breaches: Loss or theft of client or third-party data, including personal information.

• Intellectual Property Infringement: Unintentional use of third-party code, trademarks, or content.

• Cyber Attacks: Ransomware, hacking, and denial-of-service attacks targeting your systems or your clients’ systems.

• Contractual Liability: Failing to meet service levels, deadlines, or performance guarantees.

• Regulatory Investigations: Breaches of privacy laws (e.g., NZ Privacy Act, GDPR) or industry standards.

• Supply Chain Risk: Incidents at your vendors or partners impacting your service delivery.

What Does Technology Liability Insurance Cover?

A comprehensive policy typically includes:

• Professional Indemnity: Defence costs and damages for claims of negligence, errors, or omissions in your services or advice.

• Cyber Liability: Incident response, data breach costs, business interruption, cyber extortion, and third-party claims.

• Media Liability: Claims for defamation, copyright, or trademark infringement in digital content.

• Network Security Liability: Claims arising from failure to prevent unauthorised access, malware, or data loss.

• Privacy Liability: Claims for failure to protect personal or confidential information.

• Breach Response: Access to IT forensics, legal, and PR experts to manage and contain incidents.

• Regulatory Fines and Penalties: Where insurable by law, cover for certain fines related to privacy or data protection breaches.

• Business Interruption: Loss of income and extra expenses due to system outages caused by cyber events.

Current Market Trends and Insurer Expectations

• Demand is surging, but supply is tightening. Insurers are more selective, with detailed risk assessments and higher premiums.

• Robust risk management is now a precondition. Insurers expect:

  • Multi-factor authentication for all remote/admin access

  • Endpoint detection and response (EDR)

  • Regular, tested backups

  • Patch and vulnerability management

  • Incident response planning and testing

  • Cybersecurity awareness training for all staff

  • Vendor/supply chain risk management

• Detailed questionnaires are standard. Be prepared for technical and operational scrutiny before cover is offered.

• State-sponsored attacks and catastrophic events are often excluded. Check your policy for these limitations.

Lessons from Real-World Incidents

• Case Study: A large NZ medical provider suffered a ransomware attack after hackers exploited a remote access vulnerability. The breach led to exfiltration of sensitive data, business interruption, and a payout of nearly$1 million. The incident highlighted the importance of strong access controls, rapid incident response, and having a tested business continuity plan.

• SMEs are frequent targets. Even small tech firms are at risk, and the financial and reputational impact can be severe.

Benefits Beyond Insurance

• The application process itself is a risk management exercise. It helps identify and address weaknesses in your security and operations.

• Having insurance is a “badge of quality.” It demonstrates to clients and partners that you meet high standards of risk management and compliance.

Practical Steps for Technology Companies

1. Review your current cyber and operational controls against insurer expectations.

2. Engage IT and cybersecurity specialists to address any gaps.

3. Prepare for detailed insurer questionnaires—start early, as the process can be time-consuming.

4. Develop and test an incident response and business continuity plan.

5. Train all staff in cyber awareness and secure development practices.

6. Maintain up-to-date records of systems, data, and security measures.

7. Notify your insurer promptly of any incident or suspected breach.

8. Seek professional advice to ensure your cover matches your risk profile and operations.

Summary

Technology Liability Insurance is now a vital protection for any business delivering digital products or services. The insurance market is rewarding those who invest in robust controls and risk management—and is increasingly excluding those who do not. A careful review of your current arrangements, and a clear understanding of your exposures, is essential.

If you have any questions about your Technology Liability insurance, want to review your current policy, or need help preparing for the application process, please contact us. We are here to help you navigate these complex issues and ensure you have the right protection in place.