Lloyd's launches new E&O facility for tech sector
Errors and omissions liability can be so costly for technology companies as to be catastrophic. A new consortium at Lloyd’s has brought together the capacity and claims expertise designed to help businesses protect themselves against an E&O bombshell.
Lloyd’s involvement in providing large technology companies with the errors & omissions insurance they need has been ramped up with the launch of a new underwriting facility. Led by Barbican Syndicate 1955, the consortium underwrites technology E&O insurance and reinsurance business on a worldwide basis, providing cover for a wide range of companies including software developers, hardware manufacturers, internet and application services providers as well as telecom systems and data integration businesses.
In addition to Barbican Syndicate 1955, the other consortium members are Novae Syndicate 2007, Kiln Syndicate 510 and ANV Syndicate 1861. The lead underwriters on the facility are Stuart Quinlan, deputy active underwriter of Syndicate 1955, and Geoff White, underwriting manager and head of Barbican’s specialist eRisks division.
Typically, E&O policies are designed to cover liability associated with economic losses arising from a third party’s use of the insured’s goods, products or services. It can also cover damages to a third party arising from loss, damage or corruption of data.
Geoff White says that tech companies today face an array of potential E&O risks, but breach of contract is the one most commonly encountered.
I have been in the sector for 13 years and I estimate that around 60% of E&O claims we see are to do with breach of contract.Geoff White, Underwriting Manager and Head of Barbican’s Specialist eRisks Division
Another claim we commonly see is breach of intellectual property rights, usually where source code has been used in another product, either intentionally or unintentionally.
The tech sector is typified by very big claims and one of the IT industry's longest-running and most expensive court cases was an E&O breach of contract dispute. In a widely publicised case, the broadcaster BSkyB was paid a total of £318m in 2010 to settle a dispute over a contract that it entered into ten years previously with the IT supplier EDS.
BskyB had hired EDS in 2000 to build a £48m customer relationship management (CRM) system. But relations between the two companies broke down in 2002 and BSkyB ended up building the system itself at a reported cost of £265m.
Tech E&O is not an attritional book – it’s one where you get very large cat claims.Geoff White, Underwriting Manager and Head of Barbican’s Specialist eRisks Division
By putting together a consortium of likeminded individuals at Lloyd’s we aim to offer large technology companies the cover they need.
The consortium members have extensive experience in insuring the tech business and have the knowledge needed to understand the varied needs of an extensive customer base as well as the flexibility to adapt its insurance products to meet rapidly changing market requirements.
The consortium’s highly experienced team is supported by a dedicated claims service which includes the specific technology expertise needed to resolve claims smoothly.
Technology is such a fast moving area you really need people who specialise in it every day. You can’t dip into it when you have the odd claim.Geoff White, Underwriting Manager and Head of Barbican’s Specialist eRisks Division
When a claim happens it takes a sensitive approach because very high profile business relationships can be involved.