Running a business comes with many benefits but also increases the liabilities and risks taken on by owners, employees and the business itself. An E&O insurance policy covers professional liability in the event of a lawsuit. The financial burden of such a suit can cause long-term problems for a company, so a client can file a claim stating an employee or worker committed a negligent act or did inadequate work. Protect the assets of the business with an errors and omissions insurance policy.
E&O Insurance Coverage
Regardless of the basis of a claim, lawsuits can happen to any business of any size or in any industry. Sometimes there is no basis for the claim at all, but lawsuits can still cost companies or individuals a lot of money even if they win. The financial burden includes defense costs, time away from work and potential damage to the individual’s reputation. Professional insurance usually covers these circumstances:
- Personal injury (e.g. slander or libel)
- Defense costs
- Independent contractors
- Temporary staff
- Damages and claims
- Actual or alleged negligence
- Claims from past services
Non-Covered Items
E&O Insurance covers many claims filed against an individual or employee of a business. However, there are a few things not covered by most policies, which may include the following:
- Personally identifiable information
- Fraudulent acts
- False advertising
- Bodily injury
- Trade secrets
- Property damage
- Patents
Businesses That Benefit from Coverage
Some but not all states have laws requiring businesses or professionals to have errors and omissions insurance. However, any business or professional providing services to clients can face a lawsuit. Not only do the policies cover attorney fees, many also cover additional expenses, including charges by expert witnesses and mediation costs. These professionals, among others, are required to carry some E&O insurance policy in certain states:
- Home health aides
- Psychologists
- Architects
- Therapists
- Nutritionists/dieticians
- Accountants
- Social workers
- Insurance agents
- Real estate agents
- Occupational therapists
- Consultants
Examples of Errors & Omissions Claims
For example, a person seeks out a financial advisor for an insurance policy. The individual can file a claim stating that the agent lacked in control, consistency and knowledge, or can allege that the agent didn’t provide them with enough information.
As another example, a homeowner purchases a home using a real estate agent. The homeowner then sues the agent for defects found on the property after closing, alleging that the agent did not disclose that information prior to the sale.
Whether true or not, clients can file claims against a professional or company due to perceived negligence. If you provide a service to a client, in addition to having professional insurance, consider keeping copies of all information given to clients in case of future need.
Choosing the Right Plan for Your Business
Insurance agents or brokers specializing in errors and omissions insurance can break down the benefits and costs associated with the policy. They can go over the specific risks and liabilities covered under the policy. A good agent keeps you informed and helps you choose the right policy for your business and industry-specific concerns.
Companies and company owners need protection from a variety of events, including lawsuits from clients. Errors and omissions coverage can be essential for any business.
