Topic: Professional Liability / E&O Insurance for freelancers

[micah]

Any of you who do freelance work ever thought about (or do you have) Errors & Omissions insurance or some other umbrella insurance that covers your professional work?  I'm not usually one to buy insurnace that isn't mandated, but it seems like something that could be prudent.  I believe myself to be a competent programmer but as I've started doing side work again I worry that an error or service interruption on my part, causing loss of business or worse a leak of personal or financial information, could result in a law suit against me.

My latest gig has me building a potentially heavy-use cloud-based business app that collects a bit of personal data and also passes along financial data (not storing credit cards though at least) but still, its got me thinking about the potential pitfalls.

In the past I haven't worried about this too much, I've mostly done brochure style websites and if something like that happened, well, my plan was to just ignore and file bankruptcy    -- that options off the table (at least for the next 7 years) and I have a family to support.  Research shows it could be a bit pricey, like $75-$100/month (although its tax deductible).

Thoughts?

edit: i filled out a quote form from a geico ad and it says that a $500k policy is only $32.50/month.  Thats hovering around 5% of my current projected gross income for freelance work this year (presuming i don't bring in new business in 2016). 

[kermi3]

Different line of work, but I have both an umbrella and professional liability insurance.  Not sure if I need both - especially since I have an employer, but it's a safety net...

[ober]

I haven't had anything but I basically remove myself from any potential liability in my contracts and have that discussion up front.

I have considered setting up a LLC to protect my personal assets which is much cheaper and should offer the same protection.

[micah]

I'm thinking of revisiting this but not sure if its worth it.

I have an LLC for my side work which currently consists of just one client... but that one client earns me a good chunk of change now (about 16% of my gross income this year) and the site I built him has grossed $10.5 million dollars in sales since we launched (most of which is processed through card transactions on the site with the remainder being about $800k in outstanding contracts that get paid through a monthly billing system I built.  Last month we launched ACH (online check) transactions and are storing those account numbers (its encrypted but with just some code I wrote myself, not a legit crypto library).  Plus the database has about 13,000 customer records (containing name, address, email, phone and vehicle VIN data)

All those numbers make me nervous.

The thing is, my "client" isn't actually the owner of the site.  Everything I do is as a subcontractor (well there's no contract) of this guy who acts as the project manager. He bills the site owner and I get paid by him (and my 1099 comes from him).  So if shit hits the fan with something I wrote, is he on the hook for legal issues?  Also, over the last year, he's been hiring other programmer to work on piece-meal parts of the site when I'm unavailable so while I built the whole system, its not like I'm solely liable for the code base.  Am I just overthinking the whole thing or does some kind of professional insurance seem prudent at this point?

[ober]

The LLC is meant to cover you.  I'd also get a contract in place ASAP.  All of my contracts remove my liability to data issues as they are the true testers and owners of the functionality.  I make them sign over that responsibility before I ever take on a project. 

And I don't even have an LLC.  I probably should, but even my brother who has one questions the need (he works out of his shop solely for his father-in-law).  I realize they offer a level of protection but my contracts are written in a way that I should only need to present that in a court to get out of any disputes.