Outsourcing an Integration: Does Tech E&O Cover Contractor Mistakes?

Separate your company’s protection from the contractor’s

Ask the insurer to identify the wording addressing work performed by others and the definition identifying insured people or entities. Have it explain how each applies to a customer claim against your business and a claim naming the developer. Do not infer one answer from the other.

Chubb’s technology-services page identifies subcontractor nonperformance as a potential source of contract-related exposure. That illustrates why a customer claim against your business deserves review even when another party performs the work. It does not establish contractor coverage or insured status.

• Does the policy address services performed on your behalf by subcontractors or independent contractors?
• Is the contractor itself an insured, or does the relevant provision address claims against other insureds arising from its work?
• Does the answer depend on contracting with an individual rather than a development company?

Sources: 4 Technology Errors and Omissions Insurance Risks · Technology Services and Consulting Insurance Solutions

Match the actual integration work to covered services

Create a short task map: code development, API configuration, customer-data migration, testing and deployment approval. Compare those activities with the policy’s technology-products and technology-services definitions, any schedule of covered activities, and endorsements. A familiar job title such as developer is not a substitute for that comparison.

Travelers highlights definitions in its CyberRisk Tech offering that can accommodate products or services changing during the policy period. That feature concerns product and service scope; it does not establish coverage for your particular contractor.

• Ask whether the outsourced integration falls within the existing service description.
• Ask whether the arrangement needs disclosure, clarification or an endorsement before work begins.

Sources: 4 Technology Errors and Omissions Insurance Risks

Test the allegations, not just the phrase contractor error

Hypothetical example: An outsourced API-mapping error disrupts customer orders. The customer demands compensation from your SaaS company, alleging both deficient work and failure to meet the promised launch date. The review should address both allegations, not stop at whether contractors are included.

Travelers describes its CyberRisk Tech product as addressing breach-of-contract and negligence claims without a delay exclusion. Those product features are reasons to inspect your own form—not reasons to assume it contains the same protection.

• Locate contractual-liability and delay exclusions, including any exceptions.
• Ask how the form treats delivery commitments, service credits, liquidated damages and customer indemnity obligations.

Sources: 4 Technology Errors and Omissions Insurance Risks · Technology Services and Consulting Insurance Solutions

Separate customer damages from fixing the project

Keep four categories separate: the customer’s claimed financial loss, defense expenses, your integration rework, and refunds or credits. Travelers’ Tech E&O discussion addresses customer allegations and the costs of defending and settling claims. It does not establish coverage for rebuilding an integration, issuing credits or paying a contractor’s disputed invoice.

For each category, ask the insurer to identify the applicable coverage wording or explain why it is outside the policy. Keep any unconfirmed project costs separate in your planning rather than assuming a contractor-related liability provision will reimburse them.

• Ask which expense categories qualify as covered loss.
• Check the retention, applicable sublimits, consent requirements and whether defense expenses reduce the liability limit.

Sources: 4 Technology Errors and Omissions Insurance Risks

Review the contractor’s policy and agreement separately

Treat the contractor’s insurance and written obligations as another review, not a substitute for understanding your own coverage. Travelers’ contractual-risk-transfer article discusses allocating project responsibilities, insurance and indemnity terms, and obtaining legal guidance. Its general discussion does not establish that your company qualifies as an insured under a contractor’s E&O policy.

• Compare the entity signing the agreement with the entity named on the contractor’s professional liability policy.
• Check whether its covered services match the coding, integration or migration work it will perform.
• Ask what policy provisions or endorsements substantiate any promise that your company will receive a defense.
• Have counsel evaluate contractual obligations separately from the broker’s or insurer’s policy review.

Sources: What Is Contractual Risk Transfer?

Prepare a focused pre-kickoff coverage review

Build a brief project summary identifying outsourced tasks, responsible entities, customer commitments, testing ownership, deployment approval and any further subcontracting. Document data access separately from the insurance questions.

The U.S. Federal Trade Commission’s business guidance recommends investigating how service providers protect sensitive data and putting security expectations in writing. Use this as an operating checklist, not proof that an insurance condition has been satisfied.

For a Tech E&O quote request to Atlas Risk Partners, start with a non-confidential scope summary and the unresolved wording questions. Availability varies by carrier, state and risk. This article is general education, does not bind or establish coverage, and is not an individualized coverage recommendation. Policy wording controls.

Sources: Stick with Security: Make sure your service providers implement reasonable security measures · 4 Technology Errors and Omissions Insurance Risks · What Is Contractual Risk Transfer?