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Defending software that performed as promised.
A software company was sued by a customer after he used the company´s cost estimating software. The software itself was found to have functioned perfectly. The customer eventually dropped the case, but only after considerable legal expenses were incurred by the software company.
Indemnity Paid: $0
Defense Cost Paid: $175,000
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The Cost of Litigation |
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The cost of litigation
to information and network technology companies has
risen dramatically in recent years as a result of product
and service disputes. Why are we seeing this sudden
influx of lawsuits?
More and more customers are willing to sue long established
business partners for performance failure problems.
The result: an increase in business partner litigation.
Dramatic increases in the average size and length of
contracts raises the plaintiff's chance that a performance
failure “will be worth the fight” and result
in a large jury award.
As market competition continues to increase, there
is a greater chance that marketing and sales pressure
will invite over-promising of supplier capabilities.
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 it at stake if the solution
fails or doesn't perform as promised.
Today companies are crossing borders to conduct business
which brings a host of new exposures due to foreign
laws and regulations.
Information and network technology companies need timely
solutions that have evolved with their industry and
the new exposures being presented. InsureCast's information
and network technology errors & omissions (E&O)
insurance offers such solutions and can help protect
your firm from the devastation of a lawsuit. Please
go to our online CoverageCoach
questionnaire to get a free no obligation Technology
Errors & Omissions Insurance quote.
Take a look at these loss scenarios and then ask whether
you have the proper insurance protection. |
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- A hacker overwhelmed several large Web sites through
multiple distributed denial of service (DDOS) attacks.
The culprit hijacked various computers throughout
the world to bombard targeted servers with seemingly
legitimate requests for data. It is estimated that
the DDOS attacks, which interrupted the sites' ability
to efficiently conduct their business, caused over
$1.2 billion in third-party liability claims and lost
business income.
- A disgruntled employee of a major consulting firm
downloaded malicious code onto the networks of the
firm, its clients and vendors. The code launched confidential
information into the public domain and destroyed some
critical corporate applications, resulting in more
than $10,000,000 in third party claims.
- An online news service created its web site by framing
the content of other media companies within their
site. By doing so, the service created the illusion
that the content was all their own. The other media
firms sued the site for copyright and trademark infringement
on the basis that the firm was a “parasitic…site
that republished the news and editorial content…in
order to attract both advertisers and users.”
- An e-tailer brought suit against a Web designer
for damages the e-tailer sustained as the result of
the unauthorized access of its private data files
by a “hacker”. The suit alleges that the
Web designer negligently designed the e-tailer's Web
site by not providing adequate safeguards to prevent
such type of intrusion.
- A hacker stole approximately 300,000 customer credit
card numbers from an online retailer. The hacker then
attempted to use the stolen information to extort
$100,000 from the company. Upon the firm's refusal
to cooperate, the hacker posted 23,000 card numbers
online. As a result of credit card cancellations and
re-issuance, the online retailer suffered approximately
$2,000,000 in lost income and third-party damages.
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Claim Scenarios: Internet
Liability, Cybercrimes, and Ebusiness Interruptions |
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Fraud and Extortion |
- Eight banking web sites in the United States, Canada,
Great Britain, and Thailand were attacked resulting in 23,000
stolen credit card numbers. The hackers proceeded to publish
6,500 of the cards online causing third-party damages in
excess of $3,000,000.
- A hacker stole approximately 300,000 customer credit card
numbers from an online retailer. The hacker then attempted
to use the stolen information to extort $100,000 from the
company. Upon the firm's refusal to cooperate, the hacker
posted 23,000 card numbers online. As a result of the charge
denials, credit card cancellations and re-issuance, the
online retailer suffered approximately $2,000,000 in lost
income and third-party damages.
- Two hackers cracked the computer systems of a major market
research firm and subsequently obtained confidential corporate
records. The stolen files included employee photographs,
network passwords and personal credit card numbers of numerous
senior managers. The hackers threatened to reveal the security
breach to the company's clients unless the Board of Directors
paid them a “consulting fee” of $200,000. Upon
retaining expert cybercrime investigators, the hackers were
apprehended and prosecuted. The research firm spent approximately
$1,000,000 in investigative and public relations fees.
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Denial-of-Service Attacks,
Sabotage and Business Interruptions |
- A hacker overwhelmed several large web sites through
multiple distributed denial of service (DDOS) attacks. The
culprit hijacked various computers throughout the world
to bombard target servers with seemingly legitimate requests
for data. It is estimated that the DDOS attacks, which interrupted
the sites' ability to efficiently conduct their business,
caused over $1.2 billion in lost business income.
- A disgruntled employee of a major consulting firm downloaded
malicious code onto the networks of the firm, its clients
and vendors. The code launched confidential information
into the public domain and destroyed some critical corporate
applications, resulting in more than $10,000,000 in third-party
claims.
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Viruses |
- In 1999, the Melissa email virus overwhelmed systems
of thousands of companies around the world. The operations
of at least 60 US -based Fortune 500 companies were brought
to a halt due to the inability to handle the massive amounts
of incoming and outgoing messages generated by the virus.
The virus collectively caused millions of dollars in lost
business income.
- The Love Bug virus (also known as the “I Love You”
virus) spread rapidly through corporate email systems, infecting
networks of hundreds of companies around the world. This
attack was followed a few days later by as many as 11 copycat
versions of the virus. It is estimated that the series of
attacks collectively cost billions of dollars in lost business
income and extra programming time.
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Personal Injury/Privacy |
- One of nation's largest health insurers inadvertently
sent email messages to 19 members containing confidential
medical and personal information of 858 other members. Although
the company immediately took steps to correct the problem,
the company is now exposed to lawsuits alleging invasion
of privacy.
- A utility admitted to a massive security breach that
left debit card details of thousands of customers open to
public scrutiny. A customer discovered the security hole
when he went to pay his bill online - he discovered three
files on the web server, containing the names, addresses
and card details of more than 5,000 home and business users,
including his own.
- An e-tailer brought suit against a web designer for damages
the e-tailer sustained as the result of the unauthorized
access of its private data files by a “hacker”.
The suit alleges that the web designer negligently designed
the e-tailer's web site by not providing adequate safeguards
to prevent such type of intrusion.
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Intellectual Property Infringement
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- An online service allowed a famous author to advertise
a book in one of its forums. The online service was sued
for copyright infringement by an artist who claimed that
the author used certain artwork on the cover of his book
without getting the artist's permission.
- An online news service created a web site inclusive of
hyperlinks to alternate sites that were maintained by traditional
print and broadcast media companies. When users clicked
the links, they were linked to a framed copy of the site,
rather than the site, itself. The traditional media firms
sued the host site for copyright and trademark infringement
on the basis that the firm was a “parasitic…site
that republished the news and editorial content in order
to attract both advertisers and users.”
- An online insurance brokerage created a hyperlink that
seemingly transferred its clients to additional pages on
the site. It was later discovered that the brokerage "deep-linked"
its users to the web pages of various insurance companies
creating a seamless navigational experience. The insurance
companies sued the online brokerage for copyright and trademark
infringement.
- In an effort to drive additional users to its site, an
online retailer registered meta tags that identified its
firm with the names of its competitors. Upon discovery of
the incident, competitors sued the retailer for copyright
infringement.
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Negligent Security |
- On June 21, 2000, hackers penetrated a US sporting apparel's
computer network and redirected its online traffic to a
rogue anti-apparel site via servers domiciled at an overseas
web hosting facility. The traffic swamped the overseas servers
and subsequently impaired service to its real customers.
The web host is suing the apparel firm for negligence in
adequately securing its Internet domain.
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Online Trespass |
- An online direct marketing company emailed solicitations
on behalf of its clients to all users of a commercial Internet
service provider (ISP). The ISP sued the marketing company
for online trespassing. The court found that the marketing
company was liable for trespass and damage to the ISP's
reputation.
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