Breach of contract is the top risk for tech companies

22nd August 2011

- Breach of contract makes up nearly half of professional indemnity claims in the technology sector -
- Hiscox launches booklet to help businesses better understand common contract problems -

London, UK (22nd August, 2011) – The top risk faced by technology companies is a client suing them for breach of contract, according to data* from specialist business insurer Hiscox. The insurer analysed data from over five years to establish that nearly half (49%) of all technology professional indemnity claims handled have stemmed from contract breach.

Some of the most common causes that tech companies’ clients use as the basis to sue include project delay and the supplied service being regarded as not fit for purpose. However, Hiscox has also seen disagreements over fees and material defects such as loss of client data.

Commenting, Alan Thomas, technology risks and insurance expert at Hiscox, said: “Breach of contract is the most common cause of professional indemnity claims we see when it comes to the technology sector. Very often this is down to poorly worded contracts which can lead to misunderstandings between suppliers and their clients. Smaller businesses can also often feel pressured into signing customers’ contracts or terms and conditions without feeling able to challenge or even review specific clauses.”

To help tech companies and IT professionals improve their understanding of the common pitfalls when it comes to drafting contracts, Hiscox has developed a booklet called Contracting hints and tips which can be downloaded from www.hiscox.co.uk. Ithas been put together with leading law firm DLA Piper, is written in simple, easy to understand English and deals with a range of contract issues including;

  • understanding what forms part of a contract
  • ensuring the full extent of responsibilities due under a contract are fully laid out
  • the differences between a warranty and an indemnity
  • how to prepare if a dispute arises.

Alan Thomas adds:
“One of the most effective ways to reduce the chance of a claim being made, which in turn reduces the chance of expensive litigation and, as importantly, a breakdown in relationships, is to ensure that contracts drafted at the outset lay out clear responsibilities and that there is an agreed process if mediation is required . Our booklet has been designed specifically to help those in the technology sector understand the common pitfalls when it comes to drafting contracts and how best to avoid future claims.”

Other risks that technology companies face include intellectual property claims, for example accidentally breaching someone else’s copyright, and theft of high value equipment from offices or data centres.

Contracting hints and tips can be downloaded at http://www.hiscox.co.uk/business-insurance/tips-and-information/contracts/. Hear about a recent Hiscox technology breach of contract claim at: http://www.hiscox.com/about-hiscox/hiscox-in-action.aspx

Ends

For further information or to arrange an interview with Alan Thomas, please contact:

Hiscox Ltd      
Abi Clark Group Communications +44 (0)20 7448 6470 [email protected]

Notes to editors

* Hiscox’s own technology PI claims figures from 2005 to April, 2011.

About Hiscox

Hiscox, the international specialist insurer, is headquartered in Bermuda and listed on the London Stock Exchange (LSE:HSX). There are three main underwriting parts of the Group - Hiscox London Market, Hiscox UK and Europe and Hiscox International. Hiscox London Market underwrites internationally traded business in the London Market - generally large or complex business which needs to be shared with other insurers or needs the international licences of Lloyd's. Hiscox UK and Hiscox Europe offer a range of specialist insurance for professionals and business customers, as well as high net worth individuals. Hiscox International includes operations in Bermuda, Guernsey and USA. Hiscox Insurance Company Limited, Hiscox Underwriting Limited, Hiscox Europe Underwriting Limited and Hiscox Syndicates Limited are authorised and regulated by the Financial Services Authority.

For further information, visit www.hiscox.com .


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