Client Sued Us for $50k Over a Buggy Website Launch: How E&O Insurance Responded
The Launch Day That Crashed and Burned
My small web agency was so proud to launch a new e-commerce site for a retail client. But on launch day, a bug in the payment gateway we integrated prevented half the orders from going through. The client lost thousands in sales and their reputation took a hit. They were furious and sued our agency for $50,000 in damages. I thought we were done for. But our Technology Errors & Omissions (E&O) policy paid for our legal defense and the final settlement. It saved our business from one bad launch day.
Web Designers/Devs: Are You One Bad Project Away from Bankruptcy? Get E&O!
Your Talent is Your Product, But Mistakes Are Expensive
As a web developer, your talent is your product. You create beautiful, functional websites. But what happens when a project goes wrong? A missed deadline, a buggy feature, a security hole—any one of these can lead to a client suing you for their financial losses. A single unhappy client on a single bad project can generate a lawsuit large enough to bankrupt your small business or wipe out your personal savings as a freelancer. E&O insurance is the financial shield that ensures one bad project doesn’t become your last.
Web Dev E&O Explained: Covering Scope Creep Disasters, Missed Deadlines, Bad Code
Malpractice Insurance for Your Code
Think of E&O insurance as malpractice insurance for web professionals. A doctor can be sued for a botched surgery. You can be sued if the “surgery” on your client’s website goes wrong. It covers their financial loss if you miss a critical deadline for a big product launch. It covers you if a bug in your code causes them to lose sales. And it defends you when a client claims the website you delivered isn’t what they agreed to in the contract. It protects you from your professional errors.
Website Hacked Due to YOUR Security Flaw? E&O vs. Cyber Insurance Needs
Two Policies for One Hack
Imagine you build a website for a client. A hacker exploits a security vulnerability in your code and steals that client’s customer data. The client sues you for providing faulty, insecure code. That lawsuit against you is covered by your Tech E&O policy. Now, imagine that same hacker also steals data stored on your own company’s servers. The cost of managing your own data breach—notifying people, credit monitoring—is covered by your Cyber Liability policy. You often need both to be fully protected from a single security incident.
Copyright Infringement Claims: Using Unlicensed Images/Code on Client Sites
The “Free” Image That Cost $10,000
A junior designer at my agency downloaded a cool image from a “free” stock photo site and used it on a client’s homepage. A year later, we got a nasty letter from a lawyer. The photo wasn’t free; it was copyrighted, and the photographer was demanding $10,000 for its unlicensed use. Our client was furious with us. Luckily, our E&O policy had a specific rider for media and intellectual property liability. It paid the settlement, saving us from a costly mistake over a single “free” image.
Comparing E&O Policies for Freelance Web Developers vs. Agencies
The Freelancer’s Shield and the Agency’s Fortress
As a freelancer, my E&O policy was a simple shield. It protected me from my own coding errors. When I grew into an agency with five developers and two designers, I had to upgrade to a fortress. My new policy needed higher limits because our projects were bigger. It needed to cover the work of all my employees and my subcontractors. And it needed to include coverage for things like copyright infringement, because I was now responsible for the mistakes of my entire team, not just myself.
How Much E&O Coverage Does a Web Design Business Need?
Your Limit Should Match Your Client’s Biggest Risk
When I first started freelancing, I had a basic $250,000 E&O policy. It felt like enough. Then I landed a project building an e-commerce site for a company that did millions in online sales. Their contract required me to carry a $2 million E&O limit. Why? Because a bug that takes their site down for a single day could cost them hundreds of thousands of dollars. I learned that your insurance limit isn’t based on how much you make; it’s based on how much your client could lose.
Filing an E&O Claim When a Client Isn’t Happy with the Final Website
“This Isn’t What I Asked For!”
We delivered a new website to a client. We had built it exactly to the signed-off specifications. The client, however, was unhappy. They said it “didn’t feel right” and refused to pay the final invoice, threatening to sue us for failing to deliver. This is a classic, messy “failure to perform” claim. We immediately filed a claim with our E&O insurer. They provided a lawyer who helped us mediate the dispute, using the original contract as our guide. The policy helped us navigate the dispute professionally and avoid court.
My Website Project Went Massively Over Budget/Time: E&O Implications?
The Perils of Scope Creep
We had a project that was a complete “scope creep” nightmare. The client kept adding “one more thing,” and the project went months over schedule and thousands over budget. The client refused to pay the overages and threatened to sue us for poor project management. This is a tough E&O claim. A basic policy might not cover it, seeing it as a business dispute. However, a good policy with broad wording can often be triggered to provide a legal defense, arguing that the delays constituted a “failure to perform professional services.”
Does E&O Cover Claims Related to Poor Website Performance or SEO Results? Check Wording.
The SEO Promise You Shouldn’t Make
A client sued our web design agency because their new website wasn’t ranking #1 on Google for their keywords, which they claimed our salesperson had “guaranteed.” This is a very difficult claim to get coverage for. Most E&O policies will exclude claims arising from promises of future performance, like investment returns or SEO rankings. The lesson is simple: your insurance covers your errors in building the site, not your unfulfilled marketing promises. Never guarantee SEO results.
Protecting Yourself When Using Third-Party Themes or Plugins That Fail
The Plugin That Broke the Site
To save a client money, we built their new WordPress site using a popular premium theme and several third-party plugins. A year later, an update to one of the plugins created a major conflict and crashed the entire site. The client blamed us, their web developer. This is a common risk. A good Tech E&O policy will provide coverage for claims arising from the failure of third-party components that you integrate into your work, as long as you used a reputable source.
Client Claims Website Doesn’t Work on Mobile: E&O Claim Scenario
The Responsive Design That Wasn’t
We launched a new website for a client. A week later, they called, angry. The site looked terrible on their CEO’s specific Android phone model—the layout was broken and buttons were unusable. They claimed we had failed to deliver a “mobile-friendly” site and demanded a refund. This is a classic E&O claim. Our policy defended us, and we were able to show that the site worked on 99% of devices, but it was a lesson to always clearly define “mobile compatibility” in the contract.
How Strong Contracts Mitigate (But Don’t Eliminate) Web Dev E&O Risk
Your Contract is Your Shield; Your Insurance is Your Armor
My contract with a client is my first line of defense. It has a clear Statement of Work, a limitation of liability clause, and a defined process for handling changes. It’s my shield. It can deflect many small disputes and misunderstandings. But sometimes, a client will sue you anyway. That’s when you need your armor—your E&O insurance policy. The contract might weaken the attack, but the insurance is what pays for the expensive legal battle and protects you from a direct hit. You need both.
My Client Lost Sales Because Their E-commerce Site Crashed: E&O Lawsuit
The Crash That Cost a Fortune
My agency manages the website for an online retailer. During a major holiday sale, the site crashed for four hours due to a server configuration error our team had made. The client was able to calculate their lost sales during that period to be over $75,000. They sued us to recover that loss. Our Technology Errors & Omissions insurance is designed for exactly this scenario. It covers our client’s financial loss that results directly from our professional negligence.
Protecting Your Web Development Business from Costly Mistakes
The Undo Button for Your Business
In coding, if you make a mistake, you can hit “undo” or revert to a previous commit. But in business, there’s no undo button. If you make a mistake that costs your client thousands of dollars, you can’t just take it back. A lawsuit can be permanent. Your E&O insurance policy is the closest thing you have to an undo button for your business. It’s the one tool that can reverse the financial damage of a major professional error, allowing your business to recover and move forward.
Claims-Made Policies: Why Continuous E&O Coverage is Crucial for Web Devs
The Day After My Policy Lapsed
I was a freelance developer and decided to take a break, so I let my E&O insurance policy lapse to save money. A month later, a client from a project I did a year ago sued me for a bug in my code. Because my policy was “claims-made,” it had to be active when the claim was filed. Since my policy had lapsed, I had zero coverage. I was facing the lawsuit completely on my own. It was a brutal lesson: you need to keep your coverage continuous to protect your past work.
Does E&O Cover Typographical Errors or Content Mistakes on the Site?
The Wrong Phone Number
We launched a new website for a restaurant. My junior designer made a typo in the phone number listed on the contact page. For two weeks, customers were calling the wrong number. The restaurant claimed they lost thousands in reservations and catering orders and blamed us. This is a tricky claim, but a good E&O policy can often be triggered to provide a defense. It falls under the umbrella of a “professional error” in the service we provided, even if it was a simple typo.
What if ADA Compliance Issues Lead to a Lawsuit Against Your Client (and You)?
The Website That Wasn’t Accessible
We built a website for a large retailer. A year later, they were sued under the Americans with Disabilities Act (ADA) because the website was not accessible to visually impaired users who use screen readers. The retailer then sued our agency, claiming we should have built the site to be compliant. This is a new and growing area of liability. A good Tech E&O policy will defend you against these claims, but it’s why understanding and discussing ADA compliance with your clients upfront is now so important.
Insuring Web Hosting or Maintenance Services You Provide
The Maintenance Plan and the Missed Update
My agency offers ongoing website maintenance plans. A client on our plan had their WordPress site hacked. An investigation showed that our team had forgotten to apply a critical security patch that had been released a month earlier. The client sued us for negligence. Because our E&O policy was written to cover our “professional services,” which included maintenance, it responded to the claim. It’s crucial that your policy covers all the services you offer, not just the initial build.
Web Dev E&O: Coding Your Business for Financial Security
Your Financial Source Control
As a developer, you use source control like Git to manage your code, track changes, and recover from mistakes. Your Errors & Omissions insurance is the financial source control for your business. It tracks your projects through retroactive dates. It manages the risk of bad commits (buggy code). And most importantly, when you face a catastrophic merge conflict (a lawsuit), it allows you to revert to a stable financial state. It’s the system that protects the entire repository of your business.