Operating a business is always a risk, and if you are in the business of providing professional advice and services, some errors could cost your business. Having errors and omissions (E&O) insurance could help protect the business you have worked so hard to build. Consider this scenario. A real estate agent sells someone a house. The buyer later finds out that the house’s foundation is sinking and fracturing and blames the real estate agent for missing this crucial detail. E&O insurance could help the real estate agent pay for the costs of alleged losses, attorney’s fees, and a settlement or a judgment.
Companies that primarily provide services or give professional advice to clients could find themselves in a similar situation. How can professionals protect themselves in this situation? One solution to consider is E&O insurance.
Read on to learn more about E&O insurance, how it works, and how much it costs.
What Does Errors and Omissions Insurance Typically Cover?
E&O insurance, also referred to as professional liability insurance, can help provide financial protection for companies and professionals if a client alleges their work is inadequate or they committed a negligent act.
E&O insurance can help an insured pay for the following expenses, subject to policy limits:
· Judgments: Monetary damages awarded to the plaintiff.
· Attorney fees: Costs of hiring an attorney to defend the insured.
· Court costs: Costs such as filing fees.
· Settlements: Claim settled out of court.
E&O insurance can cover the costs arising from various service-based business liabilities, including:
· Negligence. Professional negligence occurs when a professional breaches their duty of care or fails to perform their services to the required standards of their profession.
· Errors. Losses resulting from errors, mistakes, or oversight in performing a service may be covered.
· Omissions. Losses resulting from a professional leaving out important information that a client needs to know may be covered under E&O insurance policy.
· Misrepresentation. A professional that presents themselves as having experience in an industry when they don’t, may be considered a misrepresentation.
· Inaccurate advice. A client who believes they have been financially harmed by a professional’s advice can bring a claim against the professional.
What Does Errors and Omissions Insurance Typically Not Cover?
E&O insurance typically doesn’t cover the following:
· Fraudulent, criminal or dishonest acts
· False advertising claims
· Injury or property damage claims (typically covered under a general liability insurance policy)
· Claims related to employment practices
· Identity theft claims
Is E&O Insurance Required?
Some states may require E&O insurance for certain licensed professionals. For example, in some states, real estate agents must have E&O insurance to cover acts requiring a license. Ultimately, whether a professional is required to maintain an E&O insurance coverage depends on the industry and applicable state law.
Even if E&O insurance isn’t required, it is still good idea to consider obtaining E&O insurance coverage for any company or professional who offers consulting, advisory, or other services to clients.
How Much Does E&O Insurance Cost?
Like other business insurance costs, the exact cost of an E&O insurance policy will depend on a variety of factors, such as:
· Business risk. The number and type of clients a business provides services to may affect premium rates.
· Coverage limits. The more coverage a company has under the insurance policy, the higher the costs.
· Claims history. A company with a history of claims will typically end up paying more for insurance coverage.
· Location. Like with many other types of insurance, the business location can determine some of the costs.
· Industry. The financial industry can have higher risks than several other industries. Depending on the risk profiles of industries and professions, premium costs can vary.
· Number of employees. A higher number of employees means potentially increased likelihood of errors.
The Bottom Line
Overall, E&O insurance is a way for a business to help protect themselves and their employees against financial burden of negligence claims made about the professional services or advice provided by the business and its employees. If a company or a professional makes an error which results in a loss, E&O insurance may help cover expenses they could incur as a result of legal proceedings.
If your company is looking for E&O insurance and other business insurance, we can help you find the right insurance provider. Contact us here at Acrisure to learn more about E&O insurance and to get started with finding the right coverage for your business and employees.
Source: https://www.acrisure.com/blog/what-is-errors-and-omissions-insurance