Inside a Technology E&O Policy: The Parts That Decide How It Responds
At some point, someone hands you the document. It might be the policy you already bought, or a quote summary for the one you are considering. Either way, it runs to many pages of definitions, conditions, and exclusions, and the premium and the limit are the only two numbers most people ever look at.
Those are not the parts that decide whether the policy protects your company. This page walks through the parts that do, in roughly the order you meet them in the document: what the policy promises, the definitions it turns on, how far back it reaches, what the limit is really worth, what it excludes, and what it requires of you. At the end of each part is what to check in your own policy or quote.
First, the uncomfortable part: there is no standard wording
There is no single standard Technology E&O policy. Each insurer writes its own wording. The parts described on this page recur across most wordings, because the policies are solving the same problem, but the actual words differ from insurer to insurer, and the differences are not decoration. A definition written slightly wider or narrower can decide a claim.
That has a practical consequence when comparing quotes. Two quotes showing the same limit and a similar premium are not necessarily the same product. One may define your work generously and pay defence costs on top of the limit. The other may do neither. The limit is the easy part to compare, which is why it is the part everyone compares.
And one rule governs everything below: your own policy wording is the document that decides. This page describes how these policies typically work, in general terms. It is a reading guide, not a substitute for the wording itself.
The insuring agreement: what the policy responds to
Near the front of the policy sits the insuring agreement, the core promise. In general terms, a Technology E&O insuring agreement says the policy responds to claims made against your company alleging an error, omission, or negligent act in your technology services or technology products that causes a client a financial loss, subject to the rest of the wording.
Two things in that sentence do heavy work. The first is that the policy responds to claims. This is liability coverage: it is about allegations brought by others, mainly clients, and the cost of defending and resolving them. The second is the basis the policy is written on.
Technology E&O is typically written on a claims-made basis. That means the policy that responds is generally the one in force when the claim is made against you, not the one in force when the work was done. Work performed three years ago can produce a claim this year, and it is this year's policy that is asked to answer it, subject to the retroactive date described below.
What to check: Read the insuring agreement itself, not just the summary page of the quote. Confirm the promise is framed around technology services and products, and confirm the policy is claims-made, because several other parts of the policy only make sense once that is clear.
The definitions: the words the whole policy turns on
Every policy has a definitions section, and in a Technology E&O policy one definition matters more than the rest: the definition of "technology services," and of "technology products" where the wording defines it separately. The insuring agreement promises to respond to claims arising from your technology services. Whatever those words are defined to include is what the policy is actually about.
A definition in a wording written for the industry will typically name activities such as software development, systems integration and implementation, managed services, hosting, data processing, technical support, and consulting or advice related to technology. The exact list varies by insurer, and that variation is the point.
What to check: Hold the definition up against what your company actually does, including the work described on your own website and in your client contracts. If a significant part of your revenue comes from an activity the definition does not name, or describes differently, that is a problem to raise before you buy, not a detail to discover during a claim.
The retroactive date: how far back the policy reaches
A claims-made policy reaches backward as well as forward. The retroactive date is the line it reaches back to: typically, the policy responds to claims about work done on or after that date, and not to work done before it. A new company's first policy commonly carries a retroactive date at the policy's start. Over years of continuous renewal, that date stays where it started while the company accumulates a history of work behind it.
This is where gaps open quietly. Letting coverage lapse, even briefly, or switching insurers without attention to the date, can reset the line and leave earlier work outside the new policy. The premium saving from a switch can be small next to the value of the history the retroactive date protects.
What to check: Find the retroactive date on your policy or quote and compare it to the one on your current policy. On a switch, the new date should generally reach back at least as far as the old one. If a quote shows a more recent date, ask why before accepting it.
The limit, defence costs, and the deductible
The limit is the ceiling on what the policy will pay. What the limit is actually worth depends on a question many quotes do not answer on the summary page: are defence costs inside the limit, or paid in addition to it?
In many wordings, defence costs are paid from inside the limit. A claim that costs a significant amount to defend, even one the company wins, can consume a meaningful part of the limit before any settlement or judgment is paid. In other wordings, defence costs sit outside the limit. Neither structure is unusual. They make the same headline limit worth two different amounts.
The deductible, sometimes called a retention, is the amount your company pays first on a claim, and in many wordings it applies to defence costs as well as to settlements and judgments. It matters less than the limit and the defence question, but it is part of the real cost of the policy.
What to check: Ask, in so many words, whether defence costs are inside or outside the limit, and note the deductible. If your client contracts set the limit you must carry, remember that a contract requiring a given limit says nothing about how much of that limit a defence could use up.
Exclusions to read twice
Exclusions take things out of the policy. Every wording has them, and most are uncontroversial. A few recur in Technology E&O wordings and deserve a slow read, because they interact with how Information Technology companies actually work.
Contractual liability. Wordings commonly exclude liability your company takes on only because a contract says so, beyond the liability that would have existed without the contract. Client contracts in this industry routinely contain indemnities, service credits, and guarantees. What to check: whether the promises your standard contract makes sit beyond what the exclusion contemplates.
Known circumstances and prior acts. A policy typically does not respond to claims arising from circumstances you already knew about, or should reasonably have known about, before the policy began. What to check: the unhappy project, the client who has already threatened a claim, the dispute sitting in email. These belong in the open at application and renewal, not discovered later.
Intellectual property. Infringement is often treated in parts: excluded in part, carved back in part, with patent commonly treated more restrictively than copyright or trademark. For companies whose product is software, this is not fine print. What to check: how the wording treats an infringement claim arising from the technology you build or supply.
Failure to maintain. Where a wording touches security practices, some wordings include exclusions or conditions tied to maintaining the standards described in the application. What to check: whether anything your company stated about its practices has become a condition the policy can be measured against.
Conditions: what the policy requires of you
Conditions are the obligations the policy places on your company, and in a claims-made policy one of them is genuinely time-sensitive: notice. Wordings typically require you to notify the insurer of a claim promptly, and many also allow or require notice of circumstances that might give rise to a claim, even before anyone has sued. Reporting a circumstance during the policy period can matter later, because it ties a future claim to the policy in force when you reported it.
Two other duties recur. The policy typically requires that you not admit liability, and not settle or offer to settle, without the insurer's consent. It also requires cooperation with the defence. These sound administrative. At claim time they are not: an apology with a settlement offer attached, sent before the insurer is told, can complicate the very coverage the claim needs.
What to check: Find the notice clause and note exactly what has to be reported, to whom, and how quickly. Then make sure the people in your company who would first hear about a claim, a threat, or a serious client dispute know that the clause exists.
Endorsements, and where this policy sits
Endorsements are amendments attached to the policy. They change the base wording: extending a definition, adding or removing a coverage part, adjusting how the policy treats work in another country, and similar adjustments. They are part of the policy, and a limit or promise on the summary page may be qualified by one.
Finally, context: for most Information Technology companies, this policy does not sit alone. Technology E&O is commonly bought inside a Technology insurance package that combines coverages, which raises its own questions about shared limits and what else is inside. That buying reality is covered on the comparison page.
What to check: Read the endorsements list on any quote, not just the headline coverages, and ask what each one changes.
The checklist: questions to ask about your own policy or quote
- Does the definition of technology services name the work my company actually does?
- What is the retroactive date, and does it reach back as far as my current policy's date?
- Are defence costs inside the limit, or in addition to it?
- If the policy sits inside a package, are the limits shared with other coverages or separate?
- Do the exclusions, especially contractual liability and intellectual property, sit comfortably against the contracts we sign and the product we sell?
- What does the notice clause require, and who in the company knows about it?
Reading a specific quote?
If the live question is what a client contract requires, the Requirements Review walks through nine questions about your company and your contracts and gives a general indication of the coverages firms like yours usually need to check.
If you have an actual policy or quote in hand and want to read it properly, a free consultation is the place to do it together. Bring the wording, not just the summary page. The summary page is the one part of the document that was never going to decide a claim.
FAQ
Is there a standard tech E&O policy?
No. Each insurer writes its own wording. The parts are similar from policy to policy: an insuring agreement, definitions, a retroactive date, limits, exclusions, and conditions. The words inside those parts differ, and the differences can matter at claim time. Two policies with the same limit are not necessarily the same product.
What does "claims-made" mean on a tech E&O policy?
It means the policy that generally responds is the one in force when the claim is made against your company (and, in many wordings, reported) during the policy period, rather than the one in force when the work was done, subject to the retroactive date and the wording. It is also why continuity matters: a lapse in coverage, or a switch that moves the retroactive date forward, can leave earlier work unprotected.
Are defence costs part of my limit?
It depends on the wording. In many wordings, defence costs are paid from inside the limit, so a long defence reduces what remains for a settlement or judgment. In others, defence costs are paid in addition to the limit. The only way to know is to check your own policy or ask about a quote in those terms.
I'm switching insurers. What should I watch?
Two things above all. First, the retroactive date: the new policy should generally reach back at least as far as the current one, or earlier work can fall outside it. Second, known circumstances: anything you already know about that might become a claim should be dealt with openly at the switch, because a new policy typically does not respond to circumstances known before it began.