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Why You Probably Don’t Have Product Liability for the Software You Develop... Yet​

In software development, liability is tricky to pin down (see our post “The State of Software Liability”). You could theoretically be sued for negligence if your software goes haywire or crashes at an inopportune time, but state laws and license agreements usually limit your liability.

 

Things get complicated when you realize that software inhabits more than cyberspace. It increasingly controls real-world products in everything from airplanes to household appliances in the vast, ever-expanding Internet of Things. For the risk-conscious among us, this leads to a few questions:

 

  • What happens if someone is injured because of faulty software?
  • Could you be sued for product liability?
  • Is there software developer insurance or product liability insurance that can address this risk?

 

We talked to attorneys specializing in software development law to find the answers. The short version: it’s complicated. But the marriage of the digital and physical could mean software developers may become liable for their coding in the same way that physical manufacturers like automakers are liable for the cars they produce.

 

As for insurance to cover this risk? It’s also complicated.

 

Current Laws Regarding Software Liability

 

Software is like anything else that you buy, says attorney Peri Berger, an associate at Harris Beach PLLC(@HarrisBeach). “In very broad terms, if the product harms someone and you can prove that it was the software that caused the damage, you are likely going to recover for your injuries.” Of course, there are exceptions to every rule, he adds.

 

The claim brought in such a scenario would be one of negligence, Berger says. This means that…

 

  1. The software vendor owed the user a duty to provide functioning software;
  2. The software did not live up to that standard;
  3. The user suffered harm;
  4. The software caused that harm.

 

The caveat, Berger notes, is that this is how it would go down in the absence of any contract between the parties, according to standard tort law.

 

Most software vendors these days, however, use contracts or license agreements with users that define the terms of the relationship. “Increasingly (and these days, almost uniformly), these contracts contain provisions that limit the liability of the software vendor, even if the software fails entirely,” Berger says. “Speaking broadly, these provisions are generally enforceable.”

 

This is important because when there is a contract between two parties, you generally cannot recover under another theory of liability. “In other words,” Berger says, “the general negligence claim that I spelled out is generally not available where the parties have reduced their relationship to a contract.”

 

What about a claim of product liability then?

 

“There is some noise out there about products liability in the context of software, but I do not think that is something that is generally accepted by the courts,” Berger says.

 

Regardless, a contract might still supersede that liability.

 

Software and Third-Party Injuries

 

With a strong license agreement between the user and software developer, it seems that product liability is largely limited, according to Berger. But that doesn’t mean the developer is completely in the clear when someone is injured.

 

“Flaws in software that cause an injury to person or property may absolutely result in liability to the software developer,” says attorney Tom Flores of Bay Area Law Center.

 

Flores offers an example:

 

  • Say a boat is equipped with software to control its engines.
  • The software developer hardcoded a test to run on July 4, 2017, at 6:00 p.m. by running the engine at full throttle for 15 minutes and someone is injured as a result.
  • The software developer and the boat manufacturer may be liable for those injuries.

 

He also points out that software bugs can even be lethal, citing the case of the Therac 25 radiation machine in the mid-1980s, which involved programming errors that led to massive overdoses of radiation treatment.

 

“When safety is at issue, the software should be rigorously and thoroughly tested,” Flores says. “As an attorney for software companies, the more QA, red team exercises, and data security measures my client employs, the better I sleep at night. In my opinion, extremism in the name of quality assurance and consumer safety is no vice.”

 

Though developers enjoy a large degree of protection, Flores says contractual disclaimers may not always shield the manufacturer from all personal injury and tort claims. And sometimes, complex circumstances leave a developer wide open.

 

Berger uses 3-D printing as an example.

 

“3-D printing is a mixture of software, hardware, and a tangible product,” he says. “If I download a program to 3-D print a paper clip and it prints defectively because of a fault in the software such that the paper clip slices open my finger, I might very well be looking at a products liability lawsuit.”

 

Can Product Liability Insurance Help?

 

Commercial General Liability Insurance (CGL) typically includes coverage for product liability claims against manufacturers. Could it apply for software developers, too?

 

“There are insurance policies that cover these types of situations, but obviously that would be something that falls to individual policies and individual software failures,” Berger says.

 

So in a word: maybe.

 

Limits and exclusions will vary from policy to policy. Talk with your insurance agent about what your General Liability Insurance covers. You may also want to consult with an insurance coverage attorney as well, Berger suggests, before you decide on a policy. In the shifting world of technology, it may take a law degree to know exactly how you’re liable and how to protect yourself.

 

Whether you’re a software developer or just use their programs, check out “4 Ways IT Businesses Can Reduce Software Liability.”

 

About the experts:

 

Peri Berger is a senior associate at Harris Beach PLLC. His experience includes complex commercial litigation and the defense of products liability cases in New York, New Jersey, and the federal courts.

 

Tom Flores practices software licensing law in Silicon Valley at the Bay Area Law Center.

 

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