Common Reasons Software Developers Get Sued

Developers need to know about liabilities related to the software they create and sell. If your software causes property damage or injury, clients can sue your company.

This report will provide information to help protect your business from software product liability. It provides need-to-know information to safeguard you and your business—and insights to make informed decisions and how to manage your risks with NJ Technology Insurance.

It’s increasingly important to avoid risks because so many aspects of any business rely on software, making your keen awareness of software liability a high priority. Knowing the basics of software liability is the first step to protect your business from lawsuits and keep it out of trouble.

Concerns and questions for software development business owners include:

• If a software flaw causes an injury, what would happen?
• Can I be sued for a software design defect?
• Is software product liability insurance going to reduce my risk?

Your users can sue you if your application crashes and causes physical injuries, property damage, or financial harm. Technology companies are not exempt from being held responsible for damage caused by manufacturing defects.

Errors and omissions insurance protects against lawsuits claiming financial harm, while software product liability insurance protects your business from claims coding errors that cause a physical injury. Although statutes and licenses can limit your liability, they neither fully protect you nor keep you out of trouble.

Liabilities are all around you, starting with security and privacy issues. Here are some common reasons why software developers get sued:

Misleading Security Practices

The FTC has been cracking down on companies who mislead customers about their cybersecurity measures. They’ve even gone after tech giants like Google and Facebook over similar issues.

In one case against Google, the agency alleged that it misled users into thinking its Chrome browser was more secure than other browsers.

The Federal Trade Commission, Bureau of Consumer Protection Director, Jessica Rich, said: “Google’s research showed that it could be tricked by a malicious website to install malware, and yet they told consumers Chrome had built-in security features.”

This example shows how misleading practices can lead to legal action against any developer. If you claim your software or app has specific security capabilities when it doesn’t, then you may have a litigation risk. For example, it is a violation of consumer protection laws to claim your software product protects against viruses when it doesn’t; you’re at risk of contentious lawsuits. You lower the risk of legal action by making sure your claims about the security of your products are accurate before stating them publicly.

Misperceptions and Lack of Understanding

Your clients are not likely to have your technical know-how as a software developer. And you may fail to provide a full explanation of your software product or service’s limitations or make assumptions about what they know.

A miscommunication with its marketing department led to confusing customer-facing communications and resulted in a lawsuit against Nvidia. The chances for misinterpretation increase for remote work. Even if you didn’t do anything wrong, you could face a lawsuit because someone misinterprets your message.

Errors and Omissions

A few hours of downtime can cause a significant negative impact on a client’s business. Clients can bring a lawsuit against your software development company if your service crashes or goes offline. The collaborative platform Slack was recently sued over downtime after failing to live up to claims they could provide uninterrupted service.

Meeting the standards expected in your industry is one of the things your clients expect rightfully. Making sure your software performs as anticipated intensifies your need to check for coding errors thoroughly.

Discrimination

Tech companies and software developers of all sizes face lawsuits that claim biases of sexism and ageism. These lawsuits happen because someone thinks your company made an unfair decision affecting them. The software industry has many easy-to-find examples of accusations of sexual harassment, such as those against Uber, a ride-sharing company. Frequently, tech companies face allegations of discrimination based on race, age, or ableist reasons.

American workers use the courts to hold their employers accountable for violating civil rights laws—in 2020; we saw accusations of discrimination against companies like Amazon, McDonald’s, and Pinterest.

Contractual Exposures

Typically, no one expects to break a contract. However, an emergency or illness can cause missing deadlines. A misinterpretation can lead to delivering software that doesn’t meet client expectations. It is no longer surprising to see multi-million dollar lawsuits from clients who claim developers had long delays or did not deliver apps and services as agreed upon in their contract.

A non-compete clause can be the source of legal problems for software developers. It is crucial to make sure new employees and contractors read and understand the terms of your employment or contract agreement carefully.

Trademark and Copyright Infringement

You have potential legal exposure if you or your team pastes or copies code or other content found online. Any graphics, music, or video clips in your app or software that are not original or adequately licensed create possible lawsuits claiming trademark or copyright violations. If the trademark or copyright owner finds a connection, they can sue your company.

A recent example of intellectual property right ownership is the battle between Redfin and its co-founder, David Eraker. They are in dispute over who owns the technology for 3D home tours. As a software developer, you must be careful when using content in your code.

It’s possible to reduce your risk, but you can’t eliminate it, which is why commercial insurance to protect against the threats outlined here is so important.

At the Dickstein Associates Agency, we provide software developers and tech companies with comprehensive, competitive insurance solutions. Due to our industry expertise, we have access to top-tier insurance companies that create tailored insurance programs for our clients with NJ Technology Insurance needs.

About Dickstein Associates Agency

Dickstein Associates Agency has distinguished itself as a leading provider of personal and business insurance in the tri-state area since 1965. We pride ourselves on being advocates for our clients and providing them with quality and affordable coverages. As Trusted Choice™ independent insurance agency, we partner with various national and regional carriers, allowing for flexible coverage for each client’s unique circumstances. For more information on how you can leverage all your insurance to work best for you, and how we can secure the best insurance in the marketplace suited to your specific needs and business objectives, contact us today at (800) 862-6662 or www.dicksteininsurance.com.