Assumed liability – an insurance issue for IT firms

assumeIt’s a good idea for software developers and other IT firms (or any professional services business) to have professional indemnity (“PI”) insurance. This insurance can provide cover and other assistance in the event of a customer claim.

However, it’s important to understand how your PI policy works. One important issue is that PI policies often exclude cover for what is known as “assumed liability”. This is essentially where you voluntary assume additional risk beyond what the law would normally impose, which is something that we occasionally see in commercial contracts. Beyond the general risks or assuming a higher level of liability, It is important to consider any potential insurance implications.

Service providers and other suppliers who agree to provide “the best” – or any standard or duty higher than usual – should be aware of the possible implications this may have on their insurance cover.