Navigating the Intersection of International Privacy Laws and E&O Coverage for Tech Companies

With the accelerating evolution of tech tools and services comes a growing web of privacy regulations and compliance demands. For tech companies, these changes don't just present operational challenges, they fundamentally alter the landscape of Errors and Omissions (E&O) insurance. Understanding how these shifts impact E&O coverage and what decisions tech companies need to make is crucial for mitigating risk and ensuring compliance.

Why E&O Insurance Matters for Tech Companies

Errors and Omissions insurance is a cornerstone of risk management for tech companies. It provides coverage for financial losses arising from professional mistakes, negligence, or failure to deliver promised services. At a time of heightened scrutiny around data privacy, E&O policies must now extend their protection to privacy-related liabilities, including:

• First-party and third-party claims related to data breaches.
• Regulatory violations arising from privacy laws.
• Financial losses impacting downstream customers.

E&O insurance is no longer just about protecting against mistakes, it’s a shield against the financial and reputational fallout from increasingly complex global privacy regulations.

The Growing Impact of Privacy Regulations

In the past few years, privacy regulations have multiplied across jurisdictions, creating a patchwork of compliance requirements that tech companies must navigate.

Domestic Privacy Regulations in the U.S.

Laws like the California Privacy Rights Act (CPRA), which amended the California Consumer Privacy Act (CCPA), the Illinois Biometric Information Privacy Act (BPIA), Virginia's CDPA, and Colorado's Privacy Act (CPA) have set stringent standards for data protection. These laws demand robust compliance measures, including data handling transparency, consumer rights protections, and secure storage practices. There is also a whole host of additional state regulation in the works or being actively updated, including  Texas (TDPSA) as of July 1, 2023; Oregon (OCPA) as of July 1, 2024 (and to be in effect July 1, 2025 for non-profits); Montana (MCDPA) as of Oct 1, 2024; Tennessee (TIPA) to be enacted as of July 1, 2025; Indiana (Indiana CDPA) to be enacted as of Jan 1, 2026; Iowa (IA CDPA) as of Jan 1, 2025; and Delaware (DPDPA) as of Jan 1, 2025.  

International Privacy Frameworks

On the international stage, the General Data Protection Regulation (GDPR) continues to serve as the gold standard for privacy compliance, with updated enforcement actions and stricter penalties. But emerging privacy laws in regions such as Asia and South America are adding new layers of complexity. In August 2023, India enacted the Digital Personal Data Protection Act establishing a comprehensive framework for personal data protection. Indonesia's Personal Data Protection Law (PDP Law), the country's first comprehensive data protection legislation, came into full effect on October 17, 2024, after a two-year grace period. And in December 2024, Chile established a new Data Protection Law (DPL) that regulates the processing of personal data and creates the Personal Data Protection Agency (PDPA), among other provisions.

These developments reflect a global trend toward strengthening data privacy and protection, and companies must assess whether their practices align with cross-border data transfer regulations, storage requirements, and repatriation protocols.

The Role of AI and Emerging Technologies in E&O Coverage

The regulatory landscape is also adapting to address the risks posed by artificial intelligence (AI) and other emerging technologies. At home, AI regulatory expansion is already taking place in California, Colorado, and Connecticut. And abroad, the European Union's AI Act, enacted in 2024 with provisions coming into effect in 2026, provides a glimpse into the future of tech regulation.

Key Provisions of the AI Act include

1. Risk Categorization
   AI systems are categorized into prohibited practices, high-risk systems, and minimal-risk systems.
2. Human Oversight
   ‍High-risk AI systems, particularly those in healthcare, education, and law enforcement, require stringent human oversight and data governance.
3. Fines for Noncompliance
   ‍Companies face penalties up to  £35 million or 7% of global turnover, whichever is higher.

For tech companies, these regulations necessitate significant adjustments to how AI systems are developed, deployed, and monitored. Failure to comply could result in substantial fines and damage to reputation, making E&O coverage with tailored endorsements an essential safeguard.

Strategic Decisions for Tech Companies

To navigate this landscape, tech companies must adopt a proactive approach to their E&O insurance. Here are key steps to consider:

1. Evaluate Current Policies

Tech companies should review their existing E&O policies to identify gaps in coverage, particularly around data privacy and regulatory compliance. Ensure policies account for:

• Regulatory fines and penalties.
• Cross-border data transfer risks.
• Emerging threats like ransomware and AI-related liabilities.

2. Monitor Regulatory Developments

Keeping a pulse on legislative changes is critical. Regulations often undergo multiple revisions, as seen with CCPA. Companies must remain agile, adjusting their compliance strategies and E&O policies to address new requirements.

3. Adopt Comprehensive Compliance Measures

Incorporate robust data handling practices, human oversight for AI, and transparent governance frameworks. Compliance is not only about meeting legal standards but also about minimizing risk exposure for insurance purposes.

4. Anticipate Emerging Technologies

Technologies like machine learning, blockchain and Distributed Ledger Technologies (DLT), large language models (LLMs), Generative and Explainable AI, Extended Reality (XR), Metaverse, and nanotechnologies introduce unique risks. Understanding how these innovations impact privacy compliance and related liabilities will be vital for securing the right E&O coverage.

5. Engage Specialized Expertise

That’s a lot for a company of any size to keep tabs on. Working with insurance brokers who specialize in tech E&O coverage can help ensure that your liability posture is always fine-tuned to these challenges. The brokers at Flow bring years of industry experience, stay informed about evolving privacy laws and regulatory changes, and can help secure endorsements tailored to specific risks, such as AI applications or blockchain-based technologies. Negotiating better coverage terms demands a deep understanding of claims trends.

Your Flow Broker Can Be Your Advisor

Insurers and brokers are becoming more than just providers, they’re strategic advisors helping tech companies navigate compliance and risk. 

The best insurers:

• Offer mid-policy reviews to assess compliance and emerging risks.
• Provide trend analysis to anticipate future challenges.
• Stay ahead of regulatory changes, ensuring policies remain relevant and effective.

As international privacy laws evolve, tech companies face mounting pressure to adapt. These changes not only redefine operational practices but also influence the scope and structure of E&O insurance. By taking a proactive approach, evaluating policies, engaging experts, and staying informed, tech companies can secure the coverage they need to thrive in a rapidly changing world. Flow can help you navigate these changes across multiple jurisdictions, mitigate coverage gaps, and provide peace of mind in an uncertain regulatory environment.

Contact a Flow Broker to discuss how to keep your coverage ahead of regulatory trends.