SLA gaps your Tech E&O won't close
The uptime promise in your MSA is a contract. Your Tech E&O is insurance. They are not the same thing, and founders confuse them at their peril.
Two things that are not the same
Your MSA commits you to 99.9% uptime and a remedy - usually service credits - when you miss. Tech E&O defends the claim a customer files in tort or contract when your outage cost them money. The former is a promise to perform; the latter is liability for failing to.
Founders assume the SLA's liquidated-damages clause caps the customer's recovery, so the E&O is secondary. Courts routinely set aside service-credit clauses as penalties and let the customer pursue actual damages - which can dwarf the credits.
Why service credits aren't a cap
A service-credit is a pre-agreed contractual remedy for a missed SLA. It is not, by itself, a liquidated-damages cap unless the clause says 'in lieu of all other remedies' and is enforceable as one. Most aren't drafted that way, and Ontario courts apply a penalty doctrine that can void the cap entirely.
Result: the customer takes the credits and then sues the difference. Your Tech E&O has to pay the difference.
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Risk notes, once a month.
One short note on Ontario tech risk - breaches, regulation, and what your policy should actually cover.
How to bridge the gap
Two moves. First, ensure your E&O definition of 'wrongful act' includes breach of contract, not only negligence - unendorsed policies sometimes limit cover to tort. Second, size the E&O limit to the largest customer's actual exposure for a 24-to-72-hour outage, not to your annual contract value with them.
If your biggest customer loses $400k/hour when you're down, a $2M E&O won't cover a single bad weekend. The limit belongs to the customer's downtime math, not your invoice.
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General information only. Not insurance advice.