Errors and Omissions Insurance
We all make mistakes.
This is why it's important to have Errors and Omissions insurance coverage. If you provide a service or advice that goes awry, Errors and Omissions insurance will provide coverage for the liable business to finance defense costs, settlements and regulatory penalties.. Consider the following professional liability scenarios:
Errors and Omissions Insurance FAQs
E&O insurance, also known as professional liability insurance coverage, protects professional services firms from claims of errors, omissions or negligence.
No. While technically the term professional is limited to certain licensed professionals such as physicians, lawyers and architects, in practice Errors and Omissions insurance and professional liability Insurance are interchangeable.
The amount of E&O insurance needed is based on risk exposure. What is your business’ greatest exposure? You’ll want to make sure you’re fully covered for it.
For example, an investment services firm’s biggest exposure may be clients litigating over an investment strategy that didn’t pan out. For an architecture firm, the possibility of a faulty building design represents a major risk. Other factors in determining coverage amounts include the state in which a business operates, the number of its employees and its revenue. Also, keep in mind that the Errors and Omissions policy is generally written so that legal defense costs erode the limit of coverage. Significant defense fees could limit or even exhaust the amount available for a settlement or judgment.
E&O insurance does not cover damage to your business’ property or injuries sustained in or on your property, which are claims suited to general liability or property/casualty coverage. In addition, Errors and Omissions insurance doesn’t cover illegal activities and fraud.
Errors and Omissions insurance covers your business for the professional services it offers to customers and clients, and any claims against those services. D&O insurance covers your business’ directors, officers and employees for the decisions they make on behalf of the business.
Yes, as the negligence pertains to the firm’s professional services.
Follow these steps:
- Notify your broker and carrier as soon as possible.
- Submit relevant documentation that includes a narrative of the events leading up to the claim.
- Anticipate the claim adjuster’s questions; provide the answers with your claim’s submission.
- Work with your broker to make sure the submission is complete.
Surety bonds protect a firm’s clients for their losses in the event you fail to perform as promised. Errors and Omissions insurance protects the professional or business owner for the claim made against them when your professional service harms a third party such as a client.
To effectively limit your exposure to professional liability, it’ is vital to have a comprehensive E&O insurance policy in place. This policy should encompass coverage for errors and omissions, as well as protection against claims of negligence, breach of contract, and misrepresentation. Additionally, businesses can mitigate their exposure to professional liability by implementing robust risk management practices. These practices include providing ongoing training and education to employees, conducting regular audits and reviews, and establishing clear policies and procedures for professional services. By taking these proactive steps, businesses can significantly reduce the risk of errors and omissions, thereby minimizing their exposure to professional liability.
