When technology behaves as designed – but liability still arises

As technology becomes more automated and embedded in everyday business decisions, tech liability is arising in ways that don’t fit normal patterns. In many cases, systems behave exactly as they were designed to – yet still lead to allegations, disputes, or regulatory scrutiny. For tech companies, and for brokers who advise them, this is changing how risk needs to be understood and explained. 

The rise of technology discrimination claims 

As technology companies rely more heavily on automated decision-making, a new class of liability is becoming hard to ignore. More and more, discrimination-related claims are linked not to what the people in the company intended, but to how the technology behaves in practice. 

Put simply, these claims arise when software systems – such as hiring tools, access controls, or algorithms – are alleged to disadvantage certain individuals or groups based on how they operate. For technology companies, the issue is rarely about malicious intent. In many cases, systems behave in line with their intended design and outcomes, using defined criteria to sort, rank, or filter outcomes. 

What makes this exposure challenging is that companies can act in good faith and still face allegations. Accessibility-related complaints offer a useful reference point, where digital services may unintentionally exclude users despite careful design choices. As automated systems become more complex and more embedded in everyday decisions, similar allegations are beginning to surface across a wide range of tech products and platforms. 

As a result, for technology companies using automated or AI-driven decision-making, this exposure has become a practical business risk, rather than a hypothetical one. 

Why these claims don’t fit neatly into traditional Tech E&O or Cyber 

One reason tech discrimination claims are difficult to explain is that they do not sit nicely within traditional insurance categories. They often do not involve a cyber breach, stolen data, or a security failure. At the same time, they may not stem from a clear professional mistake. 

In many cases, traditional Tech E&O policies have been silent on discrimination allegations arising from technology products, or have excluded them altogether. 

Instead, liability can arise from outcomes. From how a system behaves over time. From the impact those decisions have on an organization’s users, customers, or applicants. 

This creates a grey area, because there may be no obvious “incident” to point to. The system continues to operate. The business continues to function. Yet an allegation still arises. That gap between system behaviour and traditional triggers is where confusion often sets in, particularly when trying to determine how coverage should respond. 

Another signal of Tech E&O change: when data is corrupted, not stolen 

Not all modern technology losses involve stolen or encrypted data. In some cases, systems continue to run, but the information they rely on (or produce) is quietly compromised by threat actors. Data may be altered, manipulated, or corrupted in ways that are not immediately visible. 

For tech companies, this matters because harm can arise from corrupted outputs rather than system downtime. A platform may continue to function, while producing flawed results that lead to financial loss, reputational damage, or downstream claims. In some scenarios, this type of data corruption can also be associated with cyber extortion activity, even though no data has been encrypted or removed. 

From a liability and coverage perspective, these situations can be difficult to categorize, with no obvious breach, system failure, or traditional trigger – yet significant consequences can still arise. This is another example of how modern technology risk does not always align neatly with legacy assumptions across Tech E&O and cyber coverage. 

Why explainability matters 

As tech liability shifts towards outcomes and system behaviour, clarity becomes critical. Explainable coverage supports faster decisions today and fewer surprises later, and makes it easier to explain complex risk clearly to technology clients who already know their own technology well. 

Find out how BOXX Insurance is redefining Tech E&O in Canada for 2026