In insurance lingo E&O insurance is supplementary liability insurance that enhances any business owner’s policy by safeguarding against catastrophic loss in the event of a lawsuit due to a negligent act, error or omission by the professional. What this means is that when someone is being sued based on their professional trade, E&O insurance will help protect them.
lawsuits have become common place in our society. As a professional, if you make an error in advising someone, you could be sued. Unfortunately this is a gap area in your standard business liability policy and you are left with no financial help from your insurance company unless equipped with E&O.
Who needs E&O insurance
Accountants, lawyers, and consultants are some of the most often cited professionals who need E&O insurance. Realistically, anyone who provides services should at least explore E&O insurance. For doctors it is malpractice insurance, for lawyers and accountants it is professional liability insurance, but it really all boils down to E&O insurance.
When your actions or lack of action affects your clients you have an exposure and most likely need E&O insurance.
An event planner schedules the entertainment, and caterer for the 12th when the event is on the 22nd. They will be held responsible.
A logistics coordinator sends a time-sensitive delivery to Fremont, OH instead of Fremont, CA causing their client to lose thousands of dollars. They will be held responsible.
An advertising agency mistakenly makes one of their clients look racists causing a hit in their reputation and an enormous loss in sales. That advertising agency will be held responsible and likely be sued.
If you have even the slightest thought that E&O insurance is for you, it is worth it to consider it. It's free to ask, so have a local agent review your business to identify if there is a need for E&O insurance or not.
A deeper look into E&O insurance
E&O insurance, also considered professional liability insurance, covers large legal defense costs incurred when trying to prove liability or innocence. They also ultimately cover the final judgment if the business owner does not win the lawsuit.
Many individuals question the need for E&O because they already have liability insurance. That would make sense, except a general liability insurance policy will not provide coverage in service errors or contractual disputes.
Not all events are necessarily caused by an error on the advising party's side. If the results did not meet what was promised or meet expectations, the advising company can be taken to court.
E&O insurance covers judgments, settlements, and defense costs. Even if the allegations do not hold up in court, a business could still spend thousands of dollars defending themselves. With a new or small business this could be enough to put them under which is why E&O should really be considered.
Getting E&O insurance
While there may be online E&O insurance quotes, I would recommend talking with a real agent. Every E&O policy is different and a generalized quote online may leave you open to exposures. Each policy must be explored carefully to ensure that the policy matches the exposures well.
You can find E&O insurance from many different insurance companies but some offer competitive rates for specific industries. Insurance companies will also offer slightly different claim limits.
Having an E&O insurance policy that does not fit well with your exposures is basically a waste of money. If a chiropractor had the same policy as a surgeon, one would be left completely open to exposures that fit in their specialized skill, which is where most of the highest costs mistakes could be made. The need for knowledge in identifying these exposures and knowing where to turn for E&O insurance for different industries makes independent insurance agents invaluable.
For more information about Oakland business insurance, give Dealey, Renton & Associates a call at 800-545-3090.