Technology Errors & Omissions (E&O) insurance policies were designed primarily to cover claims related to performance failures, negligence, and mistakes in technology-related products and services. Too often, and typically only after a claim, policyholders are surprised to discover that the E&O policy provides a limited level of protection for intellectual property (IP) related risks and lacks the comprehensive protection that a dedicated IP insurance policy offers. These limitations expose businesses relying on the IP related coverage found in their E&O policy to significant legal and financial risks, particularly for those operating in the innovative sector, and usually at the most inopportune time.
Below are the key differences:
Third-Party Contractual Indemnities
- Technology E&O: Provides limited coverage for contractual indemnity obligations related to technology performance but does not comprehensively cover indemnities related to IP disputes. If a company agrees to indemnify an employee, customer, vendor or any other third party against IP infringement claims, an E&O policy will not cover the associated costs.
- IP Insurance: Offers broad coverage for third-party contractual indemnities, ensuring that legal expenses, settlements, and damages arising from IP-related disputes in contracts are covered. This is important for businesses that enter into agreements requiring indemnification for IP related risks.
Patents
- Technology E&O: Expressly excludes patent infringement claims, leaving companies vulnerable to costly lawsuits from competitors and patent trolls.
- IP Insurance: Specifically includes coverage for patent infringement, which is one of the most expensive and complex types of IP litigation. It provides financial protection against allegations that the company’s products or services infringe on another party’s patents regardless of merit.
Misappropriation of Trade Secrets
- Technology E&O: Does not cover claims related to trade secret misappropriation, leaving companies unprotected if a competitor, employee, or business partner steals or improperly uses confidential information.
- IP Insurance: Provides direct protection for trade secret misappropriation, helping businesses cover legal expenses to recover stolen information, enforce non-disclosure agreements, and pursue litigation against unauthorized users.
Legal Expenses to Pursue Infringers
- Technology E&O: Focuses only on defending the insured company against claims made against them and does not cover offensive legal actions, meaning it does not fund lawsuits to enforce IP rights.
- IP Insurance: Covers both defensive and offensive legal expenses, including the costs of pursuing infringers, enforcing patents, trademarks, copyrights, and trade secrets, and litigating breaches of IP-related contracts. This proactive protection helps companies maintain the value and exclusivity of their IP assets.
Breach of Contract Defense and Pursuit to Enforce Contractual Rights
- Technology E&O: Provides defensive coverage only, meaning it can help with breach of contract claims made against the company, but it does not provide financial support to defend contract violations related to IP.
- IP Insurance: Covers both defense and pursuit, allowing businesses to enforce their contractual IP rights, ensuring compliance with NDA’s, licensing agreements, and protecting revenue streams from unauthorized use of their IP assets.
Conclusion
Technology E&O policies are intended to cover claims related to performance and negligence with only minor protection against the Intellectual Property risks that many technology-driven businesses face. A Comprehensive IP Insurance Policy fills these gaps by expanding coverage to include patent disputes, trade secret misappropriation, contractual indemnities, and litigation expenses necessary to both defend and enforce IP rights. Businesses that rely heavily on their intellectual property, such as technology firms, software developers, and innovators, should strongly consider dedicated IP insurance to fully protect their most valuable assets.
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Chris Jones
Account Executive, Life Sciences & Technology
I’m Chris Jones, an Account Executive specializing in Life Sciences & Technology at Axis Insurance. With over 17 years in the insurance industry, I joined Axis in 2011, bringing a wealth of experience and knowledge to the table. My expertise lies in managing technical risks, particularly in sectors such as technology, intellectual property, manufacturing, and other complex risks. Throughout my career, I have honed my skills to provide tailored insurance solutions that meet the unique needs of clients in these fields.
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