Setup
An established Illinois-based digital agency specializing in website development, design and data analytics had a range of global clients, from start-ups to well-known brands.
In 2022 the agency was briefed by a new client to develop an online shop to distribute a range of homeware and pottery goods which had garnered a significant social media following during the pandemic. After rounds of initial discussions and planning, the agency agreed that given the high demand it needed to deliver the platform by Q4 2022.
Given the agency’s profile—working with multiple clients across multiple projects— it had to juggle resource to keep work on track. While communication with this particular client remained strong, deadlines started to slip as other projects took priority. The agency made sure to notify the client of the delays, however on the client’s side, if their approaching deadline was not met, it would mean a huge knock-on effect to their business goals and reputation for not delivering to their huge following as they had announced the imminent launch of their new online shop.
Claim
Ultimately the Q4 2022 deadline was not met, in part due to the client changing the scope of works causing delays. Regardless, the client did not have their platform as per the agreed timeline and they demanded consequential damages of $400,000 for loss of sales resulting from the online store being offline, as well as additional storage requirements as stock was now over capacity. The client brought legal proceedings against the agency alleging breach of contract and fraudulent conduct.
Fortunately, the agency had a technology policy with CFC. When they notified CFC of the client’s complaint, they were appointed experienced litigation defense council to not only represent them but guide them through the process and determine defence strategies.
Outcome
The technology policy covered the agency’s $86,000 in defence costs, as well as a settlement with the client of $134,000 ensuring the agency was not significantly out of pocket.
Without the ability for the policy to pay settlement costs, the dispute could have extended out significantly, incurring substantial legal costs. The defence strategy to settle the claim early with experienced negotiators highlighting deficiencies in the claimants case also meant the initial demand of $400,000 was not paid.
