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Case Scenario: Failed Insurance Agency Software Implementation

By: Brooks Hilliard, CMC, CCP
Tel: (602) 264-9263
Email Mr. Hilliard

Representing the Defendant, a Software Developer

Case Synopsis:

An property and casualty insurance agency acting as a managing general agent for several insurance lines sold through sub-agents throughout the United States had agreed to license a comprehensive agency management system from a developer of such software specifically developed for managing general agencies. The agency signed a series of fixed-price license and service agreements based on an understanding (included in the legal agreements between the parties) that the software would meet a stringently defined and limited set of the agency's needs. During the course of the attempted implementation, the agency repeatedly requested additional features that it wanted the software developer to add, without increasing the price of the project. The software developer accommodated several requests but eventually refused to continue without an increase in the agreed upon fixed price. The insurance agency terminated the project and sued the software developer to recoup the payments it had made to date.

Expert was engaged by counsel for the software developer as a rebuttal witness to rebut the opinions offered by the expert for the insurance agency.

Expert Analysis:

After the expert reviewed thousands of documents (proposals, specifications, e-mails, progress reports, deposition transcripts, etc.), interviewing key employees of the software developer and analyzing a demonstration of the insurance agency system, it was apparent that the software in question was able to meet the original set of software requirements and that the software developer had expended significant time and money attempting to provide the additional functionality requested by the agency.

  • Evidence showed that prior to the agreement between the parties, the agency had expressed a need for a system that would allow it to handle commercial package policies as a Managing General Agent for specialized lines of coverage offered by two large property and casualty insurance companies.
  • The agency made it clear prior to the signing of the agreement that price was the most critical factor in the decision on what software to acquire.
  • The software developer agreed to deliver the software at a fixed price agreeable to the agency based on a set of eleven assumptions that were presented prior to contract signing and included as an addendum to the contract between the parties.
  • Among the assumptions was one stating that the software would perform according to a defined set of rules (in use at other customers of the software developer) and that the software developer would not have to conduct (and the agency would not pay for) a "requirements study" to determine whether the agency's operations would actually fit the agreed upon rules.
  • Prior to the contract signing, the software developer had sent e-mails to the agency specifically stating that certain types of requests by the agency, if they occurred during the course of the implementation, were not covered by the agreement and could only be performed at additional cost.
  • As the implementation proceeded the parties found that the agency's actual requirements far exceeded the functionality as described in the contractual assumptions and the agency began making additional requests relating to additional lines of insurance with different coverage rules, rates and forms, among other changes, that were different from what had been previously agreed.
  • The software developer agreed to make a few of the requested changes at no cost and began doing so, but it quoted additional costs to the agency to meet its other requirements.
  • After a period of time, and substantial effort by the software developer, the agency indicated it would not pay extra for the requested changes, terminated the project and sued the software developer to recover what it had paid to date.


The expert's review of the insurance agency's expert's report showed that he had not considered any of the relevant factors indicating that the agency had agreed to a limited implementation and was knew, prior to entering into the contract, that additional requests would result in additional cost. After submission of the expert's report, the opposing party withdrew it's expert from the litigation and the case was settled prior to trial.

Brooks Hilliard, CMC, CCP has been a consulting and/or testifying expert in more than 50 cases involving computer systems alleged to have software defects, faulty operation, and/or defective performance (engaged by counsel for both users and vendors). These assignments have involved some of the industry's largest software developers. Issues have covered software and/or system deficiencies, unreliable software and defective functionality, including matters involving installation, implementation, customization and development services provided by software firms and independent contractors.

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