The High Cost of Cyber Liability
- Created: 06 August 2013
The cost of litigation to information technology companies has risen dramatically in recent years as a result of product and service disputes. More and more customers are willing to sue long-established business partners for performance problems. The result: an increase in business partner litigation.
Dramatic increases in the average size and length of contracts raises a plaintiff’s chance that a performance failure “will be worth the fight” and result in a large jury award. With companies putting more reliance on information technology solutions it increases the likelihood that software solutions will be core business solutions. As a result, much more is at stake if the solution fails or does not perform as promised. Today, companies are conducting more foreign business which brings a host of new exposures due to foreign laws and regulations.
The following real-world examples show why businesses need proper insurance protection.
A company sues for lost revenue and expenses to recover billing files for its customers that were inadvertently deleted by the software vendor who was updating the system:
Indemnity Paid: $750,000
Defense Cost Paid: $150,000
A software company was sued by a customer after he used the company’s software. The software was found to have functioned perfectly. The error was by the customer who used the software to underbid a project. The customereventually dropped the case, but only after considerable legal expenses were incurred by the software company.
Indemnity Paid: $0
Defense Cost Paid: $175,000