Should a Software Company buy Professional Indemnity Insurance?

Information technology is the backbone of many businesses yet is poorly understood by many. There is often an enormous mismatch between client and professional expectation, which can often lead to disputes from all viewpoints. IT risks used to be treated as “Miscellaneous” within the insurance market, but as the IT industry has emerged into one of worldwide importance, greater understanding of this industry has been achieved from the legal profession (and thus insurers). This has led to a specific focus on IT in its own right, with unique wordings being written to accommodate the specific exposures they face.

Below are some examples of professional indemnity claims that software companies have faced :

• The insured designed a customer management software package. It was alleged that the software failed to comply with the agreed functionality. Amount paid: £350,000

• The insured configured an off-the-shelf software package for use by the client, and sold and installed associated hardware. There were serious difficulties following installation, leading to the client refusing to pay the balance outstanding and threatening a claim. Insurers paid the outstanding balance to the insured, avoiding the expense and reputational damage of a legal case. Amount paid: £55,000

• It was alleged that there were substantial deficiencies in the design of a software package, resulting in the system failing to meet the client’s requirements. Amount paid: £450,000.

For help and advice about Professional Indemnity insurance and software company insurance please contact Adam Lawrence on 0118 9165 484, or complete one of our enquiry forms

*Information correct as of 1st May 2016

Author: Adam Lawrence | February 16th, 2012

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Adam Lawrence
Get in touch:   Reading: 0118 916 5480   London: 020 7036 8767   info@macbeths.co.uk