Errors & Omissions Insurance

Companies that supply professional services or advice and their workers, may need coverage that extends beyond what a typical commercial general liability policy can offer. In fact, in many fields some form of errors and omissions insurance is required in order to do work. This includes businesses that offer financial services, doctors or medical practitioners, lawyers, and even insurance brokers or agents. This is because these businesses are at risk of being held liable for errors and omissions while offering their professional services or after the fact.

What is Errors & Omissions Insurance?

Errors and omissions insurance, sometimes referred to as E&O insurance or even “professional liability insurance” is designed to protect you and your business from lawsuits that allege you have made a mistake in providing a promised service. Without this crucial insurance coverage, your business may be facing several thousand or even millions of dollars’ worth of legal expenses on its own.

Errors and omissions insurance covers professionals, companies, and their workers against liability claims, including claims of:

• Misrepresentation
• Advice that is misinformed or inaccurate
• Violations of ethical conduct
• Omitting critical services or advice
• Negligence in performing a service
• A mistake in a given service

Should a third-party take legal action against you or your business for an error in the services that you have provided, your insurance may cover the following legal expenses:

• Awarded settlements and judgements, which range in cost from a couple thousand to several million dollars
• Court expenses, such as paying for witnesses, reserving courtrooms, etc.
• Attorney fees, which can range in cost from a few thousand to hundreds of thousands of dollars
• Administrative expenses, such as the fees to put your defense together – i.e, paying any law officials, like office managers

All in all, legal expenses can put your business in some serious hot water without the right errors and omissions insurance – even if the liability claim is dropped. The expenses can be so large that your business may be at risk of having its doors closed permanently.

Professions That Require E&O Insurance:

Different businesses require different insurance coverage. Businesses which offer some kind of professional service or advice to clients should and may be required to carry E&O insurance. Professions that require E&O insurance include but are not limited to:

• Accounts or accounting firms
• Actuaries
• Advertising agencies
• Architects
• Educators
• Graphic designers
• Insurance brokers
• Interior designers
• Lawyers
• Marketing consultants
• Medical professionals
• Occupational therapists
• Real estate agents
• Therapists

This is only a small sampling of the occupations that may need or be required to carry errors and omissions insurance. Liability claims can come at a huge cost to you and your business – and for many businesses it can risk shutting their doors for good. To avoid risking your career with one bad situation, acquire professional liability insurance/errors and omissions insurance as soon as you can.

Examples of Errors & Omissions Insurance

Your E&O insurance can help in a few different instances, depending on the coverage you have and the business you do. Here are a few examples where having E&O insurance can come in handy for both you, your business, and your workers.

You operate as a marketing agency or marketing consultant and are making an advertisement for a client. In this advertisement, reference is made to a competitor that is incorrect or malicious. The competitor may make a claim against your marketing agency for slander.

Or, maybe you operate as an acupuncturist, and you are working on a client who is having joint pain. You are inserting needles into the patient’s joints, as per the patient’s source of pain, and after the treatment the patient complains about sudden onset shortness of breath. The client then sues the acupuncturist, claiming negligence in their practice.

There are numerous instances where errors and omissions insurance can help you out of some serious hot water, especially as liability claims are no joke. They can range in cost from a few thousand to millions of dollars, depending on your field and severity of the claim.

The Cost of Errors & Omissions Insurance

How much an E&O policy costs will depend on several variables, such as the kind of business being covered or the nature of the work you do, where your physical business is located, your coverage options, how many clients you may have or how many clients you provide services to on average, and your insurance history. A company that has a history of litigation claims may be perceived as higher risk and may be difficult to insure or will find that their E&O policy is more expensive than average.

Errors and omissions insurance is a type of liability insurance that is meant for professional service-providing or advice-giving businesses. It can be applicable to any business that constitutes as “professional” and can even cover nonprofits, contractors, engineering firms, and more. Depending on the company or business, the benefits of an E&O policy can vary but a general rule of thumb is that if you give a professional service or advice, whether it is required or not you should carry some form of E&O insurance. Keep in mind that your errors and omissions insurance policy will not cover criminal activities and certain liabilities that are not listed in your policy.

Finally, your errors and omissions insurance may only cover you for liability claims that arise after you have purchased your policy. It may or may not cover temporary employees as well and some coverage or claims may depend on your insurance provider.