Data Loss After Security Update – a Real exali Damage Event
Anyone who looks after database programs for a client as an IT freelancer anticipates a lot of work related to updates and IT security. But they don’t anticipate all the data suddenly disappearing after an update – a problem that can quickly amount to four to five digits in damages. But that’s exactly what happened to an IT service provider when he installed a security update on his client’s company server.
Company Data Deleted
But let’s start at the beginning: An IT expert signed a software maintenance contract with an Austrian company from the insurance industry, which also included support for the database program. As part of this work, the service provider installed a software update on the company’s server. After the work was done, both he and those responsible in the company were in for a surprise: All the data in the company database had disappeared – including important accounting documents and the archive, which went back several years.
To prepare for such an eventuality, the IT service provider had prudently backed up the data to an external storage device. But to make matters worse, the surface of the storage device was so badly damaged that the data it contained could no longer be read. The data carrier had a security mechanism that checked the data before each use. But apparently the contents of the storage device fell victim to a technical error: And despite the damaged surface, the check insisted that the backup was completely OK. The IT service provider had trusted the result – and was now faced with the urgent question of how to resolve this huge problem.
Even one wrong mouse click is enough to produce damages in the five-digit range. We talk about a case like this in our article Website Update Error – 90.000 Euros in Revenue Lost.
Additional Effort of Around 200 Working Hours
All electronic accounting and archive data was irretrievably lost. But the IT service provider and their client still had some luck in their misfortune: In addition to the electronic documentation, there was additional documentation on paper, which they could fall back on.
But this meant the data had to be completely manually re-entered into the computer, which involved an additional workload of around 200 hours. At an estimated wage of around 25.00 euros per hour, this added up to damage totalling 5.000 euros. Of course, the injured company demanded the IT service provider to cover these costs. Fortunately this sum wasn’t high enough to threaten the financial existence of the company concerned. But if the deleted data had been urgently needed software for daily operations, for example, the claim for compensation would have tripled.
Such damage could also cause a partial or complete stoppage of operations. The resulting loss of profit would probably have far exceeded the primary damage caused by the loss of data.
IT Indemnity Insurance Covers Financial Losses
This damage event shows a typical risk faced by IT service providers – data loss. Loss of data is a so-called “pure” financial loss that needs-based IT Indemnity Insurance should definitely cover. If it doesn’t, there is a risk that the affected freelancer will be left to cover the costs in the event of a professional error.
The term “pure” financial loss describes financial damage that is NOT the result of property damage or personal injury.
In this case, the IT expert could easily report the damage to the insurance professionals at exali. They passed the case on to the insurer, who covered the damage in full after a detailed examination.
Without coverage for “pure” financial losses through their IT Indemnity Insurance, the service provider would probably have been stuck with the costs – after all, they had not previously caused any personal injury or property damage.
Financial loss – the Main Risk For IT Freelancers
As you can see: IT service providers bear immense professional risks in connection with their work. From the loss of data, as in this case, to damage caused by delay and data protection violations, there are pitfalls that can endanger the financial existence of your business, since you are liable with your private assets if you are not insured.
With Professional Indemnity Insurance through exali, you are covered for financial damage that you cause to a client, for example. Whether it is a programming error, violation of law or loss of data: If third parties make claims for comepnsation against you, the insurer will check these claims for accuracy. If the claim is justified, the insurer will cover the costs. So you are comprehensively protected in the event of a professional mishap.
Vivien Gebhardt is an online editor at exali. She creates content on topics that are of interest to self-employed people, freelancers and entrepreneurs. Her specialties are risks in e-commerce, legal topics and claims that have happened to exali insured freelancers.
She has been a freelance copywriter herself since 2021 and therefore knows from experience what the target group is concerned about.