Modifying The Scope Of Work In Information Technology (IT) Services Contracts — Are You Covered?

The Québec Court of Appeal in Kansa General International Insurance Co. Ltd. (Liquidation de) recently dealt with the impact a change in the scope of the work can have on a supplier's insurance coverage under a professional responsibility insurance policy.

In this case, an IT supplier entered into an agreement with a client to develop and implement certain IT systems. Problems were encountered and the parties ended up modifying the scope of work in such a way that (i) the obligations of the supplier were thereafter limited to the development of the IT systems, (ii) a fixed cost was established, and (iii) a guaranteed delivery date was set. Despite these changes, the situation did not improve. Ultimately, the client decided to terminate the contract and sued the supplier for damages.