Table of contents
- Cyber events are not tech E&O's job
- Your retroactive date decides whether old work is covered
- IP infringement claims usually aren't included
- Contractual liability needs its own endorsement
- What to actually check this week
- Frequently asked questions
What does tech E&O insurance not cover? Four things catch founders off guard most often: cyber events like ransomware and data breaches, work performed before your policy's retroactive date, intellectual property infringement claims, and contractual liability you took on in a client agreement. Each one is standard practice for the industry, not a shady insurer trick. The problem is nobody explains it to you until you're already filing a claim.
Most founders buy tech E&O once, forward the certificate to whoever asked for it, and never open the policy document again. That's fine until something goes wrong. Then the gap between what you assumed was covered and what's actually in the policy becomes the most expensive thing you didn't read.
Cyber events are not tech E&O's job
A data breach, a ransomware attack, or a hacked customer database is a cyber insurance claim, not a tech E&O claim. Tech E&O responds to a client alleging you made a mistake delivering your service: a bug that broke their workflow, a missed deadline, bad output from your software. Cyber insurance responds when someone breaks into your systems or your data gets exposed.
Insurers sell these as separate coverage agreements because the risk is different: one is about the quality of your professional work, the other is about a security incident. Many brokers now package "technology E&O and cyber" together in a single policy, which is why founders assume they're the same thing. If you bought a standalone tech E&O policy, or a bundled one where the cyber portion has a much lower sublimit than the E&O portion, a breach can leave you paying out of pocket for incident response, notification costs, and third-party claims that your headline coverage never touches.
Your retroactive date decides whether old work is covered
Tech E&O is written on a claims-made basis. That means the policy covers a claim only if the claim is reported while the policy is active, and the underlying act happened on or after your retroactive date, also called the prior acts date.
If you switch carriers and the new policy sets its retroactive date to the new start date instead of carrying forward your original one, every piece of work you shipped before that switch is uninsured, even though you've technically had continuous coverage for years. Insurers call a retro date reset to the current policy's inception date "retroactive date inception," and brokers who work with startups treat it as a red flag rather than a normal renewal term.
The fix costs nothing to ask for: when you renew or switch carriers, confirm in writing that the retroactive date carries over from your very first policy. If it doesn't, you either negotiate it back or buy prior acts coverage to close the gap.
IP infringement claims usually aren't included
Claims alleging your software copied a patent, copyright, or trade secret are excluded from most standard tech E&O forms. Patents are almost never covered under any tech E&O policy at any price. Trade secrets and copyright are sometimes included at a reduced sublimit, usually bundled under a "media liability" or "content liability" endorsement rather than the base policy, and typically only if you asked for it by name when you bound coverage.
This matters more than founders expect because IP disputes show up in ordinary commercial fights, not just patent troll lawsuits. A former vendor claims your onboarding flow copies their proprietary process. A competitor claims your marketing site lifted their copy. A departing engineer's old employer claims your product used their trade secret. None of these are exotic scenarios, and none of them are covered by a bare-bones tech E&O policy unless you specifically added IP coverage.
Contractual liability needs its own endorsement
Enterprise contracts almost always include an indemnification clause: you agree to cover the client's losses if your product causes them harm, sometimes at a dollar cap well above your policy limit. Founders sign these clauses assuming their tech E&O automatically backs the promise. It often doesn't.
Standard E&O policies exclude liability you assumed under contract that goes beyond what you'd owe anyway under ordinary professional negligence rules. The policy will typically still cover a breach-of-contract claim tied to your professional services themselves, but liability you voluntarily agreed to take on through an indemnification clause, especially an uncapped one, usually needs its own contractual liability endorsement to be insured.
If your enterprise contract asks for a specific insurance minimum, that minimum is a separate question from whether your indemnity promise in the same contract is actually backed by insurance.
What to actually check this week
Pull your current policy or your renewal quote and confirm four things with your broker, in writing:
- Does this policy include cyber coverage, or do I need a separate cyber policy for breach and ransomware exposure?
- What is my retroactive date, and does it match the inception date of my very first policy, not this year's renewal?
- Is IP infringement covered, and at what sublimit? If not covered, what would an endorsement cost?
- Does my policy cover the indemnification language in my current enterprise contracts, or do I need a contractual liability endorsement?
If your broker can't answer these four questions clearly and immediately, that's a signal to get a second opinion before your next renewal, not after a claim.
Frequently asked questions
Does tech E&O cover a data breach?
No. A data breach or ransomware attack is a cyber insurance claim. Tech E&O covers claims that your professional service or software was defective, not that your systems were compromised. You typically need both policies, or a bundled policy with adequate limits on each side.
What is a retroactive date on an E&O policy?
It's the earliest date your policy will cover a claim for work performed, regardless of when the claim is actually filed. Work done before that date is uninsured even if you've had continuous coverage since.
Are patents covered by tech E&O insurance?
Almost never, at any price point. Copyright and trade secret claims are sometimes covered at a reduced limit, usually only through a specific content or media liability endorsement.
Do I need contractual liability coverage if I already have tech E&O?
If your client contracts include an indemnification clause, yes, in most cases. Standard E&O covers liability you'd owe anyway under professional negligence, not liability you voluntarily accepted through a contract.
How do I find out if my policy has a coverage gap?
Ask your broker the four questions above and get the answers in writing. Don't rely on the certificate of insurance your client asked for. It confirms a policy exists, not what it actually covers.
Insurance you never had to use feels like a waste of money, right up until the week it isn't. The cheapest time to find these gaps is at your next renewal, not during a claim.