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What Is Errors And Omissions Insurance?

Errors and omissions insurance (E&O) or also known as professional liability insurance, is insurance coverage specifically designed to protect you from lawsuits claiming that you have made a mistake in your professional services. The main purpose of this insurance coverage is to help you cover legal costs or settlements brought against you in court.    

What Does Errors And Omissions Insurance Cover?

In short, errors and omission insurance helps to protect your business from claims brought against your company. Examples of claims that can be made against your business can include the following:

  • Negligence.

  • Errors in services provided.

  • Certain omissions.

  • Misrepresentations.

  • Inaccurate advice. 

  • Violation of fair dealing and good faith. 

Below is a list of some examples of fees that E&O insurance helps you cover. These can include: 

  • Attorney fees: it estimated that an average cost for attorney fees can range anywhere from $3,000 to $150,000.

  • Court costs: examples of court costs include reserving a courtroom or paying for an expert witness.

  • Administrative costs: these costs have to do with putting your defense together, or other costs, such as paying office managers or court reporters.

  • Settlements and judgments: these costs can be quite significant for your business, ranging from a couple thousands to millions of dollars!

Why Do You Need Errors And Omissions Insurance?

To put it in simple terms, errors and liability insurance is there to protect your business from closing due to the significant expenses that come with a liability claim made against you in court. Even in the event that your customer drops the claim, you are still responsible to cover the legal costs, and as mentioned in the above, these can be quite costly. Even more worrisome can be the case in which you are found guilty or you have to pay out a settlement. Clearly, errors and omissions insurance coverage is vital to protect your business from incurring hefty financial costs. 

Below is a list of businesses that provide services to customers that ought to have errors and omissions insurance. These include:

  • Accountants.

  • Advertising firms.

  • Engineers and engineering firms.

  • Educators.

  • Marketing firms.

  • Consulting companies.

  • Website developers.

  • Hair salons or barber shops.

  • Printing and publishing companies.

  • Pet services: veterinarians or pet groomers. 

What Errors And Omissions Insurance Doesn’t Cover

So far we have established what errors and omissions insurance covers, but what coverage is excluded from this specific insurance policy? It is critical to mention that errors and omissions insurance does not cover your business for claims that happened before your policies retroactive date. Also, errors and omissions insurance does not cover your business with claims filed after your policies’ extended reporting period. 

Most importantly, errors and omissions coverage will not be there for you if you have the following claims brought against your company:

  • Illegal acts and purposeful wrongdoing: e.g. intentionally breaking the law and deceiving your clients and customers.    

  • Bodily injury or property damage that your business caused.

  • Employee injuries or illnesses caused directly by their work. 

  • Discrimination and harrasment charges in the workplace filed by your employees.  

If you are a business owner and would like to find more information about errors and omissions insurance for your company, including the cost, contact us today so that we can meet your business insurance needs.