IT Consultants Insurance – will your policy respond as you expect?

IT consultants and networking and telecommunications specialists are a lynchpin in most businesses, whether they are large or small. The extent to which their work and expertise can impact their client’s business depends on the nature of that business. A real estate agent for example would be less reliant on their IT systems than a financial institution. IT consultants should carefully consider the impact that their work can have on the customers’ businesses and what the level of exposure they have if their services fail.


When it comes to selecting an insurance policy for your business. Simply buying an off the shelf Professional Indemnity insurance policy is not necessarily going to provide the most appropriate protection for your IT consultancy. And it is important to be aware that the cheapest priced policy on offer will not necessarily respond as well as a tailored policy. IT consultants should seek advice from their insurance adviser / insurance broker to ensure their professional indemnity insurance policy will respond adequately for the services they are providing.


IT Liability insurance policies are designed specifically for IT, telecommunications and networking companies. They were developed to provide appropriate cover for the various types of risks companies in the industry are exposed to. For example:

  • An online training company is unable to operate due to the failure of a systems upgrade performed by their IT professional. $200,000 loss of business.
  • An electrical wholesaling firm invests in new systems and software which fails to perform as pledged by their software provider. $250,000 to rectify problems and cover loss of business.
  • A software developer distributing product to the USA requires legal defence following allegations of false marketing of product capabilities. $1,000,000 for legal costs and settlement.
  • A private school engages a contractor for complete upgrade of networking and communications systems. Due to lengthy time delays and performance issues the school terminates the contract and demands the return of fees for services rendered. $150,000 return of fees.

It will depend on the nature of the business that your IT or networking and communications business works in, but following are some valuable benefits that IT Liability insurance policies can offer that may not be in a Professional Indemnity insurance policy.


Professional Indemnity and Public Liability insurance

IT Liability insurance policies usually package both Professional Indemnity and Public Liability sections in the one policy. This is can be convenient and price competitive but also ensures your IT consulting activities a properly covered by one policy and one insurer.

Electronic Data Exclusion

Unbeknown to most IT consultants, many Professional Indemnity and Public Liability insurance policies contain an electronic data exclusion. This effectively removes cover for claims associated electronic data including software and programming.

Loss of Fees

If a customer dispute results in the fees for your services being withheld or if you have to pay them back, you could suffer a significant financial setback. Generally a Professional indemnity policies do not provide cover for this type of loss but some good IT Liability insurance policies will.

Worldwide cover

Many Professional Indemnity insurance policies claim to provide worldwide cover. However this usually excludes cover for claims arising out of the USA and Canada. Moreover, often the policy will only defend you in the Australian legal system. This means you will need to pay the costs of you want to defend yourself in the country you were operating in. If you operate in overseas markets, you should consider a policy with an insurer that will defend you in the overseas jurisdiction.

Loss Mitigation

More often than not Professional Indemnity insurance claims don’t reach the court system but are rather settled through negotiation with both parties’ lawyers. An important benefit not always provided in a Professional Indemnity policy is Loss Mitigation cover. This allows the insurer to reach a commercial settlement with the third party which can prevent long drawn out claims having to go through the legal system.

Advancement of defence costs

With Most Professional Insurance claims, the first costs an IT Consultant will face are the legal costs of the lawyer they engage. These can be hefty and need to be settled regularly as the clam is defended – not at completion. Good IT Liability insurance policies will cover these defence costs as they arise meaning you should not need to foot the cost of legal bills along the way.


Take the time to review you professional indemnity policy with your insurance broker / insurance adviser and pay a particular emphasis on the policy exclusions.