As an expert in your field, you probably do not give much thought to receiving backlash from unhappy customers. Unfortunately, this can sometimes happen when you least expect it. Errors and omissions (E&O) insurance is designed to protect professionals in the event that they are sued for mistakes or omissions in their services. E&O insurance is commonly referred to as professional liability insurance as it has the ability to cover professionals like accountants, lawyers, IT consultants, property managers, appraisers and title agents.
So, what does E&O insurance cover exactly? While exact coverage terms can differ from policy to policy, errors and omissions insurance typically covers damages from claims of negligent actions or inadequate work that may affect your company or staff.
Liability Coverage
Errors and omissions insurance covers a wide range of liabilities that your business might face during daily operations. Work errors and oversights are fairly common but could result in lost money for a client. That client may then try to recover their losses by filing a legal claim against your business.
E&O insurance also protects your business if a client files a legal claim due to undelivered services. Leaving a client’s work unfinished can disrupt their personal or business plans, and if they are unwilling to work it out, you could end up getting sued. Other common liabilities that a company may face that could result in a legal claim include accusations of negligence and missed deadlines. Both of these events could delay or disrupt a client’s plans, resulting in lost revenue or growth opportunities.
Types of Employees Included
Now that you know what types of incidents are covered by E&O insurance, you may be wondering who is covered. First, as the owner of the company you operate, you will be covered by all claims that arise from your services. In addition, your employees will be covered by your policy.
Sometimes, you may find it necessary to hire outside subcontractors to assist in completing a project or to perform some other type of job. You will be glad to know that most E&O insurance policies also cover subcontractors who cause financial loss to a customer. However, this is not the case with every policy, so be sure to read the terms of your plan carefully to see who is covered and who is not.
Criminal Cases Not Covered
While E&O insurance can be quite valuable under the right circumstances, it is not a fix-all for every situation. There are certain criminal cases not covered by most standard errors and omissions insurance policies. For example, most policies do not cover dishonest, malicious, illegal or criminal acts, such as the intentional violation of the law.
An E&O insurance policy will also not cover copyright, trademark or patent infringement, libel or slander, illegal discrimination, pollution, violation of any securities act, insolvency or bodily harm to any person. You will also find that your policy does not cover criminal cases relating to imprisonment, humiliation, eviction, wrongful entry, malicious prosecution and invasion of privacy.
When obtaining an E&O insurance policy, it is important to ensure that the services you provide match up with the name in the policy. Most insurance companies will not provide coverage for services that you might provide under another business name that is not named in your insurance policy.
Client Coverage
If you own or operate a small business, you may be considering purchasing errors and omissions insurance as an extra layer of protection for your company. Professionals in nearly all industries can benefit from E&O insurance, including those in the architecture, beauty, consulting, fitness, marketing, retail, property, therapy, health and home services fields. Nearly any business that provides a service and could suffer from a customer-initiated lawsuit should have E&O insurance.
With errors and omissions insurance, you will remain protected from a range of costs. This typically includes lawyer fees, administrative and court fees, defense costs, judgements and settlements. Your insurance policy may also cover expenses relating to copyright infringement, claims for past services provided, negligence and independent contractors and temporary staff.
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E&O policies can range from one insurance company to the next, but most have similar features. Know that a majority of errors and omissions insurance policies are claims-made, meaning they cover claims that are made against insured parties during the policy’s term. Sometimes an insurance policy will place limits on coverage for claims made during the policy so be sure to review your policy carefully. Also, read through the insuring agreement, which will summarize your coverage in easy-to-understand terms. If you have any questions or concerns about your policy, be sure to ask your insurance carrier.
Errors and omissions insurance has helped countless businesses protect themselves from financial ruin. To learn more about E&O insurance or to acquire a policy for your small business, contact the experienced insurance agents at John M. Glover.