Every business runs into the occasional dissatisfied customer at one time or another. However, when an unhappy customer files a lawsuit against your company, the consequences can be financially devastating. As no business owner is 100% immune to claims of negligence or inadequate work, it is important to have an errors and omissions insurance policy in place to safeguard against the unknown. E&O insurance can protect businesses of all sizes and in all industries from the repercussions of a legal claim.
What Is Errors & Omissions Insurance?
Errors and omissions insurance is a type of liability coverage designed for professionals who make a living using their expertise in a certain area. This may include IT professionals, contractors, architects, engineers, consultants, real estate agents, marketing experts, and professionals in the health and beauty industry. E&O insurance is used to protect against losses that are not covered by traditional liability insurance. If a client or customer should sue you for mistakes or omissions in your service, an E&O policy would help cover the legal costs associated with the claim, as well as some or all of the settlement if applicable.
Why Do I Need E&O Insurance?
E&O insurance can be invaluable when a situation arises that puts your organization in danger of financial loss or a damaged reputation. If a customer comes forward and claims that your services were incomplete, negligent or inaccurate, the complaint could result in a lawsuit. With E&O insurance, you can stay protected if you or one of your employees makes a mistake that could cause your business to suffer.
What Does Errors & Omissions Insurance Cover?
While not all businesses are required by law to have errors and omissions insurance, acquiring a policy can help ensure that your business does not go under due to a simple error. Here is a look at some of the most common legal claims that are generally covered by an errors and omissions insurance policy.
Claims & Damages
When a client or customer files a claim for damages, an award is paid out to the person or organization as compensation for their injury or loss. There are many types of losses that can occur, such as a loss of earnings or even non-monetary losses like emotional distress or pain and suffering. For example, an IT consultant may be sued by a business when software is installed that results in a security breach or major data loss.
Errors and omissions insurance also covers personal injury, which includes damages like slander and libel. These types of personal injuries can cause damage to a person’s or business’s character or reputation, resulting in possible financial losses and other challenges. Slander can damage a business, even if the claim is later found to be invalid. E&O insurance can protect your company against personal injury claims that may occur while operating your business.
Alleged or Actual Negligence
With an E&O insurance policy, you can also protect your business from claims of alleged negligence. In the workplace, negligence can occur when an individual or business fails to show reasonable care resulting in damage to another party. As a service provider, you have a duty of care that you must meet, and if you fail to deliver work on time, offer incorrect advice, or omit important information, you could be sued for your errors.
If you use works that are protected by law without the permission of the copyright holder, you may be guilty of copyright infringement. It is important for all businesses to comply with intellectual property laws. Failure to do so could result in a lawsuit by the original owner of the property. Fortunately, errors and omissions insurance is available to protect your business against these types of mistakes.
If a client or customer sues you and you are forced to go to court, your business will face a variety of expenses. Defense costs can quickly build up as you hire a qualified attorney and pay court fees or even possibly a settlement. Most small businesses do not have the money needed to cover such extravagant expenses. With an errors and omissions insurance policy, you can rest easy knowing that any defense costs that accumulate will be covered by your policy.
Reach Out to Experienced Business Insurance Brokers
So, who needs errors & omissions insurance? As almost every business that provides a service has some liability due to human error, businesses in all industries can benefit from acquiring an E&O policy. To learn more about errors and omissions insurance or to acquire an E&O insurance policy for your business, contact the experienced business insurance brokers at John M. Glover today.