Top 10 law firm Nabarro Nathanson has advised IT suppliers and users to check that insurance policies cover them for all their liabilities.
Their advice comes through a report issued by Nabarros in response to a series of multi-million pound cases brought by users against suppliers such as ICL, Ernst & Young and Dun & Bradstreet.
According to partner Nigel Wildish, suppliers of IT and their customers fail to pay enough attention to insurance policies and make unrealistic assumptions about their cover that do not bear up to scrutiny.
The report, which was based on a study of 25 different insurance policies and the terms and conditions used by IT suppliers, said: "Many insurance policies are adaptations of ones which have existed for many years and, therefore, predate the computer age. As a result many policies contain terminology which is inappropriate and whose meaning is unclear."
Wildish said: "It is no good customers frantically scanning the small print once something goes wrong. Both sides should sit down together and decide what the risks are."
He has called on the Computing Services and Software Association to force members to provide a 'bonded' scheme which will cover users in the event of any loss.