Errors & Omissions Insurance

It is not uncommon for business owners to think that professional liability is something only doctors, and other healthcare providers need to worry about. But in today’s world of constant litigation, more businesses than ever need to consider purchasing Errors & Omissions Insurance (E&O) to transfer their professional liability risks.

Any business organization that offers a personal or professional service is at risk of being sued for not providing a service properly or for making an error that can result in financial loss for a client. A typical example could be a real estate or a title agent that makes an error during the closing process of a real estate transaction, and the buyer or seller suffers a financial loss as a result. Certainly, the buyer or seller is going to bring an action against the agent to recover losses, and be made whole. In this instance, the E&O Insurance policy would respond by paying defense costs, settlement costs or a judgment awarded by the court.

In many states, the regulatory authority will not issue a license unless the business provides proof of this valuable insurance coverage. Some states even require they be listed as an additional insured in the event they are sued for issuing a license to the business that made the error.

It is important to understand not only what is covered by the policy, but also what is not covered :

 

• Negligence – whether or alleged or actual
• Cost of defense
• Personal Injury (libel or slander)
• Copyright infringement
• Temps and independent contractors

• Fraudulent or intention acts
• Employment matters
• Bodily injury or property damage
• False advertising
• Patents and trade secrets

Two very important coverages to emphasize in today’s technological business environment are copyright infringement and worldwide coverage. Most businesses have some type of web presence that could lead to a claim for infringing on software code, and even licensed images. Since the web is worldwide, it’s important that you are covered wherever your web presence can be accessed. 

For example, your business provides marketing services, and you have been contracted to create a slogan for a new product. Unknowingly, you use a slogan similar to another business’s, and as a result, an action is brought against you and your client. Your E&O policy will respond by providing defense costs, settlement funds or costs for a court judgment.

Like other professional liability products, Errors & Omissions coverage can be complicated to understand. Contact us for expert advice about your company’s protection, and the many coverages available and how to limit your company’s exposure.