Tech professional indemnity insurance may cover claims that your IT services, advice, software or deliverables caused a client financial loss. It's designed for businesses where the work produces both a service and a product, and where a single claim can involve professional advice, software performance and data handling at the same time. Its value depends on the declared services, software-product inclusions, contractual exclusions and whether cyber is arranged alongside or separately. Check the wording rather than the label.
Tech professional indemnity may also be called IT Liability Insurance, Technology Liability or Technology Errors and Omissions (E&O). The exact structure differs between insurers. Some policies focus on financial-loss claims only. Others combine PI with Public and Products Liability under one wording. Check whether your policy covers only service claims or also includes bodily injury and property damage.
For a full overview, see what is tech professional indemnity insurance.
At a glance
- May cover claims that your IT work caused a client financial loss
- May cover approved defence costs and, where the claim is covered, settlements or damages
- May include cover for IP infringement, confidentiality breaches and defamation
- Software products, SaaS and hosted platforms may need to be declared
- Your own breach-response costs (forensics, notifications) are generally a cyber matter
- Claims-made policies generally require notification under the policy's rules
- The right policy depends on declared services, subcontractor setup and cyber arrangements
What must be true before tech professional indemnity may respond?
Before any claim is assessed, five things generally need to line up.
1. Was the work within the policy's scope? The policy lists the professional or IT services that are covered. If the claim arises from work outside that scope, the policy may not respond. SaaS products, AI tools and new service lines may need to be declared.
2. Is someone alleging financial loss caused by that work? Tech PI responds to third-party claims. The claimant must allege your work caused them a financial loss. A circumstance, demand or allegation may be notifiable even before a formal claim is filed.
3. Did the act happen after the retroactive date? The retroactive date sets the earliest date from which a claim can arise and still be covered. Work done before that date may not be covered, even if the claim is made during the current policy period.
4. Was the claim notified as required? Claims-made policies generally require claims or circumstances to be notified under the policy's rules. Extended reporting may apply, but late notice can still affect cover.
5. Does an exclusion apply? Even if the first four checks pass, an exclusion may still restrict cover. Known issues, deliberate conduct and contractual penalties are common exclusions.
What tech professional indemnity insurance may cover
Software, configuration and integration errors. Your consulting, design, coding, configuration or support work causes a client loss. A release ships with a bug that crashes the client's platform. A cloud migration goes wrong. An API integration causes data to sync incorrectly. These claims arise from your work and may fall within the PI section.
A SaaS company releases an update with a pricing bug that overcharges users and crashes the client's checkout. The client issues refunds and sends a legal demand. Tech PI may assess the claim as a software-product error, provided SaaS work is declared.
Contract-related claims from professional errors. Where a breach of contract arises from an insured error (not just a commercial dispute), tech PI may respond. A missed deadline caused by negligent project management or a deliverable that doesn't meet specs because of a design error are examples.
A software firm integrates a CRM for a retail client. A configuration error causes data to sync incorrectly, delaying the launch by three weeks. The client claims lost revenue. Tech PI may assess the claim as a service error.
Inadvertent copyright and trade mark infringement. A client or rights holder alleges your software, content or design infringes their copyright or trade mark. This typically covers unintentional infringement arising from your work. A digital agency uses a stock image without checking the licence. The rights holder sends a demand. Tech PI's IP section may respond, provided the infringement was inadvertent.
Breach of confidentiality and data handling. A claim that your handling of confidential information or personal data caused a client harm. If your error damages or loses client data, tech PI may assess the client's financial-loss claim. If your software vulnerability causes a client breach, tech PI may address the client's allegation against you.
An IT consultant misconfigures cloud storage during a migration. Client records are exposed. The client alleges negligence. Tech PI may assess the client's claim for losses caused by the configuration error. The consultant's own forensic, notification and recovery costs generally need cyber cover.
Inadvertent defamation. A claim that something you published or displayed in the course of insured work damaged someone's reputation.
Approved defence costs. Legal fees, expert reports and court costs to defend an insured claim. Even claims that are ultimately rejected still need legal defence.
Covered settlements or damages. Where the claim is covered, the policy may pay the agreed settlement or court award, subject to the limit and excess.
Official inquiry costs. Approved legal and representation costs for specified investigations linked to covered conduct. These are typically subject to a sub-limit.
Tech professional indemnity coverage and limitations
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What does tech professional indemnity insurance commonly exclude?
- Deliberate or dishonest conduct. If the business knowingly delivered faulty work, ignored a known vulnerability or acted fraudulently, the claim may be excluded.
- Known claims or circumstances. If the business knew about a problem before the policy started and didn't disclose it, the claim may be excluded.
- Cost to correct or redo your own work. Rectification or rework costs may be excluded unless the wording includes a specific mitigation benefit. The policy addresses claims from clients, not the cost of redoing the job.
- Refund of professional fees. Refunds or return of fees are commonly excluded. The legal costs of defending the demand may still be covered.
- Liquidated damages and service credits. Contractual penalties for missing SLAs, uptime targets or delivery milestones are commonly excluded.
- Contractual liability beyond ordinary legal liability. If the contract creates liability that wouldn't exist under general law, the policy may not cover it. Broad indemnity clauses and hold-harmless terms are common triggers.
- Patent infringement. Patent claims are commonly excluded or restricted unless the policy expressly includes them. Copyright and trade mark claims may be covered.
- Deliberate use of unlicensed code or content. Knowing use of restricted software, images or code may be excluded as deliberate conduct.
- Warranties and performance guarantees. Guarantees that software will achieve a particular outcome or maintain a certain uptime aren't generally insurable under PI.
- Bodily injury and property damage. These generally fall outside financial-loss PI. Some combined IT Liability policies bundle Public and Products Liability. Others don't.
- Conduct before the retroactive date. Work done before the policy's retroactive date may not be covered.
- Related-party claims. Claims between the insured and its related entities, directors or shareholders may be restricted.
- Fines, penalties and sanctions. Fines that can't legally be insured and transactions involving sanctioned parties are excluded.
Tech PI versus cyber versus public liability
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Tech PI addresses third-party financial-loss claims from insured technology services or products. Cyber addresses first-party incident-response costs and privacy liabilities. Public liability addresses bodily injury and property damage. Many Australian tech businesses hold all three.
For a full comparison, see tech PI vs cyber insurance.
AI and emerging tech: what to check
AI is a rapidly developing area for tech professional indemnity. An AI company's platform generates content that a third party alleges infringes their copyright. The rights holder demands removal and claims damages. Whether tech PI responds depends on whether AI-generated output is within the declared services.
AI-related activities, outputs and training-data exposures may not fit older or narrower service definitions. If your business builds, deploys or advises on AI tools, check whether the policy scope covers those activities. Open-source code, model training and third-party data use may create exposures that standard wordings don't address.
Policy features and extensions to check
Not every policy includes every feature. Key items to check:
- Defence costs: inside or outside the limit? Where defence costs are additional, they may not erode the main indemnity limit, subject to any separate cap. If inside, legal fees reduce what's left for a settlement.
- Subcontractor and outsourced work. Whether claims arising from subcontractor or outsourced work are included. If you use freelancers or offshore teams, this matters.
- SaaS and software-product activities. Whether hosted platforms, software products and subscription services are within scope.
- Copyright and trade mark cover. Whether inadvertent IP claims are included and what types of IP are covered.
- Worldwide territorial scope. Whether claims from overseas clients are covered. US and Canadian jurisdiction may be excluded.
- Run-off or extended reporting. Run-off may let you notify claims from past work after the business stops trading.
- Emergency costs and claims preparation. Whether urgent legal costs before formal insurer approval are covered within defined limits.
Questions to ask before buying tech professional indemnity insurance
Are all services declared? Every IT, SaaS, consulting, hosting and support service should be within the policy's scope. A service that isn't listed may not be covered when a claim arises.
Does the definition include software products? If you sell or licence software, the product must be within scope. Some policies only cover advisory services.
Are subcontractors included? If you use freelancers, agencies or offshore teams, check whether their work falls within your cover.
How are data-breach claims treated? The client's claim against you may fall under tech PI. Your own incident-response costs generally need cyber. Make sure both are in place.
Are rectification costs excluded? The cost of fixing your own faulty work is commonly excluded. Check whether the wording includes a mitigation benefit. Refunds and service credits are also commonly excluded.
Are defence costs inside the limit? If inside, legal fees erode the cover. If additional, the full limit may remain subject to any cap.
Does the scope cover AI and emerging tech? If your business builds or advises on AI tools, the activities may need to be expressly declared.
How upcover can help
upcover arranges tech professional indemnity insurance for eligible Australian tech businesses. IT Liability Insurance options can be compared using consistent services, revenue and limits so wording differences are easier to spot.
For more on how tech PI works, see the tech PI pillar. For IT contractors, see the IT liability insurance guide.
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upcover Pty Ltd ABN 17 628 197 437 is a Corporate Authorised Representative (CAR 1299211) of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078.
Frequently asked questions
Does tech professional indemnity cover software bugs?
It may where the bug arises from your work and a client alleges it caused them a financial loss. The software or SaaS activities must be within scope. The cost of fixing the bug itself may be excluded.
Does tech PI cover data breaches?
It may cover the client's claim that your work caused their data to be exposed. Your own breach-response costs (forensics, notifications, system recovery) generally need cyber cover.
Do I need both tech PI and cyber?
Many technology businesses consider both because the policies address different risks. Tech PI covers third-party claims from your work. Cyber covers your own incident-response costs and privacy liabilities.
Does tech PI cover freelance IT work?
Freelancers may need their own cover where they contract under their own business or ABN, or are required to provide evidence of insurance. Whether another party's policy covers them depends on the insured-person and subcontractor definitions.
Does tech PI cover IP infringement?
It may cover specified inadvertent copyright or trade mark claims arising from your work. Patent claims are commonly excluded or restricted. Deliberate use of unlicensed code or content is also excluded.
Does tech PI cover the cost of fixing faulty work?
Rectification or rework costs are commonly excluded. The policy addresses claims from clients, not the cost of redoing the job. Check whether the wording includes a specific mitigation benefit.
The information in this article has been prepared without taking into account your individual needs, objectives or financial situation. It should not be relied upon as personal advice. All insurance products arranged through upcover are subject to the terms, conditions, limits and exclusions contained in the relevant policy wording and Product Disclosure Statement. Before deciding whether a particular insurance product is right for you, please read the relevant PDS and consider your personal circumstances. upcover Pty Ltd ABN 17 628 197 437 is a Corporate Authorised Representative (CAR 1299211) of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078. upcover arranges insurance products with selected insurers and underwriters and does not compare all general insurers or insurance products available in the market.
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