Licensing for Software Developers and Coders

A Vice Magazine article sums up a push that will likely continue to license individual software coders. States currently license professions from doctors to hairdressers and the trend has been increasing regulation of the most mundane professions. As the article points out, software is everywhere and the ramifications from coding errors and becoming increasingly catastrophic. The general opinion is when, not if, coders will be required to carry licenses.

There are two main liability issues that will present themselves when the first state requires licensing. The first is increased regulation and the second is increased liability. When a doctor or lawyer makes an error they are called in front of a state regulatory agency, the ensuing investigation can be costly and possibly result in the suspension or cancellation of the license that allows the professional to practice. Most professional liability insurance policies for these professions include coverage for the costs related to defending the actions taken in front of regulators. When a professional’s ability to earn a living is on the line investing in a top notch defense is paramount.

The second issue, increased professional liability, is also an expensive issue. Current case law often allows for personal liability when a license is involved. A restaurant could form an LLC to protect itself against lawsuits, for a lawyer or doctor this protection does not apply. When a professional license is required most courts allow for personal liability and disallow liability to shielded by a LLC or Corporation.

The coding and startup culture is extremely risk tolerant and many entrepreneurs delay purchasing insurance until a customer or investor forces them to do so. If licensing laws begin to propagate purchasing individual professional liability (errors and omissions) insurance will begin to become to standard. We advise all companies actively selling, servicing or developing software to require independent contractors to carry insurance. The events of today could leave to lawsuits years down the line and the laws will almost certainly be different. Companies and individuals are suffering massive economic losses from cyber events and courts are beginning to embrace the idea that the developers must pay.

Contact today to discuss your specific situation and how to better protect your venture.