5 Real-Life Tech E&O Claims and the Lessons for Your Business

Tech companies move fast. Small mistakes can turn into expensive disputes. Even when you do good work, a client can still claim financial loss. That is why technology errors and omissions insurance, also called tech professional liability, matters. It helps pay for legal defense and settlements when a client says your service caused them a loss.

This post shares five fictionalized but realistic tech E&O claim examples. Each one ends with a clear lesson you can apply. If you are researching professional liability case studies or tech E&O claim examples, you are in the right place.

1) Missed deadline leads to breach of contract claim

A software shop promised a go-live tied to a client’s seasonal launch. Scope crept, testing slipped, and the deadline was missed. The client said the delay caused lost revenue and sued for breach of contract.

How E&O helped: Defense counsel was appointed, then a settlement covered part of the client’s lost income and legal costs. The firm stayed solvent and kept operating during the dispute.

Lesson: Set realistic timelines, document changes in writing, and escalate risks early. Carry E&O if you deliver work under contract. One schedule miss can become a six-figure problem.

2) Security gaps contribute to a client data breach

An IT consultancy deployed a cloud database but skipped hardening steps and a key patch. Months later, attackers exploited the gap. The client paid for notifications, monitoring, and remediation, then sued the consultant for negligence.

How E&O helped: The policy funded legal defense and a settlement that reimbursed breach-related costs claimed by the client.

Lesson: Treat security as a deliverable. Configure, patch, and document. Many firms pair tech E&O with cyber coverage to address third-party claims plus first-party breach costs. Ask your broker how these policies work together.

3) Checkout bug crashes sales during peak traffic

A SaaS team launched a mobile shopping app. Under heavy load the checkout module crashed and orders failed. The retailer alleged the defect caused revenue loss and brand damage, then filed a professional negligence claim.

How E&O helped: Defense expenses were covered and the insurer negotiated a business-interruption styled settlement with the client.

Lesson: Load-test, monitor, and plan rollback. Bugs still happen. E&O is the financial backstop when a defect becomes a client loss claim.

4) Migration without a full backup destroys client data

A solo consultant moved a law firm to a new cloud tenant. A misconfiguration corrupted files and there was no current backup. The firm paid for recovery and downtime, then demanded reimbursement.

How E&O helped: The insurer appointed counsel and paid a negotiated amount for recovery expenses and lost productivity alleged by the client.

Lesson: Back up, verify, and test restores before any change. Use written runbooks and change approvals. E&O covers defense and damages when a mistake leads to loss.

5) Scope creep and verbal promises trigger a dispute

A web agency delivered the site in the signed scope. A stakeholder believed a verbally discussed feature was included. The client accused the agency of failing to deliver and threatened litigation.

How E&O helped: Counsel used the contract and change logs to resolve the matter in mediation. Legal fees were covered, and a modest goodwill payment closed the file.

Lesson: Align expectations in writing. Use change orders and recap emails after every call. Even when you are right, you may need to defend yourself. E&O pays for that defense.

Practical takeaways for founders and tech leaders

Write clear statements of work. Track scope changes. Patch and harden systems. Test under load. Back up, then test your backups. Document every decision. These steps reduce risk, but they do not remove it. Tech E&O exists to handle the legal and financial fallout when a client says your work caused a loss.

Coverage, terms, and limits vary by carrier and policy form. Review the actual policy to understand definitions, exclusions, sublimits, and reporting duties. Coverage is governed by the policy wording, not prior summaries.

Related reading

Tech E&O insurance for startups |
All WHINS blog posts

FAQ

What does tech E&O insurance cover?

It helps with legal defense costs and covered damages when a client claims your professional service caused a financial loss. Typical triggers include errors, omissions, failure to deliver, or negligence tied to your work.

Do small startups really need E&O?

If you sign client contracts, integrate with customer data, or ship software that others rely on, yes. One dispute can exceed your cash reserves. E&O is designed to absorb that shock.

How is E&O different from cyber insurance?

E&O focuses on client claims that your work caused financial loss. Cyber insurance focuses on security incidents and privacy events. Many companies carry both because the risks often overlap.

This article provides general information for educational purposes only. It is not legal or insurance advice. Always review the actual policy and consult with your broker about your specific situation. Coverage is governed by the policy wording, not prior summaries.