Big or small, all businesses face certain legal risks. Errors and omissions (E&O) insurance coverage provides protection for business owners and employees against clients who make accusations stating that your business cost them money. Generally, these types of policies are used to cover financial losses. Property damage or bodily injury-related claims are usually not covered. E&O insurance is well-suited for any professional who offers advice, recommendations, guidance, or services. Learn more about errors and omissions insurance, what it covers and does not cover, and why you should consult with a business insurance broker about E&O insurance policy options.
Errors and Omissions Insurance Coverage
Errors and omissions insurance policies may cover a wide range of expenses. These costs may be paid up to the limits of the specific policy. Errors and omissions insurance coverage may include:
- Defense Costs. E&O insurance will often help cover defense expenses that result from a claim made against you or your business by a client or customer who is unsatisfied with your services due to an error or mistake.
- Damages. If your case results in judgments or settlements of claims caused by services or advice provided to clients, errors and omssions insurance may provide coverage. For example, if you are a tax accountant that made errors that resulted in an audit for your client, he or she may sue you for any money loss. E&O insurance can help cover the expenses associated with this claim.
- Disciplinary proceedings. Having errors and omissions insurance can be useful when faced with proceedings that are brought by a licensing, regulatory, or other government agency that accuse your business of professional misconduct. For example, if a client files a complaint about your business with a local licensing board, a hearing may be held resulting in fees that must be paid by your business. E&O insurance can help cover these expenses.
- Subpoena assistance. If you are found to be a witness in a lawsuit, E&O insurance can help cover any expenses resulting from the receipt of a subpoena.
- Loss of earnings. Claims made by clients can lead to extensive income loss due to the amount of time spent at depositions and trials. Errors and omissions insurance can help cover this loss of earnings.
- Personal injury. While not always, some E&O insurance policies may help cover the costs associated with personal injury claims. This may include claims of slander or libel. For example, if an employee is accused of ranting about a client on social media and the client sees the post, the client could file a claim against your business for libel. E&O insurance can help cover any expenses related to this type of claim.
- Employee errors. Errors and omissions insurance may cover claims that stem from errors made by employees, independent contractors, or temporary staff. For example, if an independent contractor that works with your business provides false information to a client, resulting in money loss, the client may choose to file a claim. E&O insurance can help cover the costs of this claim.
What E&O Insurance Does Not Cover
While errors and omissions insurance can be invaluable in many circumstances in which a client files a legal claim due to an error causing financial loss, it does not cover all events. Damages generally not covered by E&O insurance include:
- General liabilities. E&O insurance is not a replacement for general liability insurance which typically covers property damage and bodily injuries. For example, if a client experiences a slip and fall accident in your restaurant, E&O insurance will not cover the cost of a lawsuit.
- Illegal acts. No errors and omissions policy covers illegal activity, including insurance fraud.
- Intentional harm or wrongdoing. Intentional acts of wrongdoing are not covered by E&O insurance. For example, say you own a boutique that sells luxury handbags. In an attempt to make a bigger profit, you begin selling knockoff bags. If your scheme is discovered, you could end up in court.
- Employee injuries. It can be devastating for one of your valued employees to become injured while at work. If the employee requires medical treatment or time off of work to recover, you may be responsible for any hospital bills and lost wages. E&O insurance will not cover these expenses. However, workers’ compensation likely will.
- Property damage. Fires, natural disasters, theft, and similar events can cause substantial damage to your business property. Unfortunately, E&O insurance does not cover the cost of damaged property. If you wish to get reimbursed for your losses, you will need to purchase property insurance.
- Employment matters. There may come a time when employment issues develop that result in legal repercussions. For example, a job candidate may file a lawsuit claiming discrimination if you hire someone else for the position. E&O insurance does not generally cover these types of employment matters.
What Businesses Need E&O Insurance?
Any type of business that provides services or offers advice needs errors and omissions insurance. This includes occupations like real estate agents, consultants, insurance agents, lawyers, financial advisors, engineers, accountants, and architects. In addition, technology professionals, tax preparers, advertising agencies, interior decorators, graphic designers, and travel agents face certain legal risks that make E&O insurance a must-have.
In some instances, businesses may be legally required by licensing boards or business partners to obtain errors and omissions insurance based on their agreed-up contracts. No matter what industry your business may be involved in, having errors and omissions insurance can provide peace of mind and prevent a financial hardship.
Contact a Business Insurance Broker
If you are a business owner, you need to protect your company against certain risks. With errors and omissions insurance, you can help keep yourself and your employees safe from financial ruin if an allegation is made against you due to an error or mistake. As E&O insurance policies can differ, it is important to speak with a professional to see which is best for your unique industry and business needs. For more information about E&O insurance or to acquire about getting a policy for your business, contact a business insurance broker at BBG Broker today.