That’s why you have Errors and Omissions insurance. Should you provide a service, or offer a client advice that backfires, your Errors and Omissions insurance will back you. In each of the cases, the company’s Errors and Omissions insurance covered the liable business, financing defense costs, settlements and regulatory penalties, when applicable. Consider the following real professional liability scenarios:
How Can You Limit Your Exposure to Professional Liability?
When providing professional services or advisement, if you've failed to deliver as expected to the customer, you could find yourself facing a lawsuit. Watch to learn ways you can limit your professional liability, or errors and omissions exposure for your business.
E&O insurance, also known as professional liability insurance, protects professional services firms from claims of errors, omissions or negligence.
No. While technically the term professional is limited to certain licensed professionals such as physicians, lawyers and architects, in practice E&O insurance and professional liability Insurance are interchangeable.
The amount of E&O insurance needed is based on risk exposure. What is your business’ greatest exposure? You’ll want to make sure you’re fully covered for it.
For example, an investment services firm’s biggest exposure may be clients litigating over an investment strategy that didn’t pan out. For an architecture firm, the possibility of a faulty building design represents a major risk. Other factors in determining coverage amounts include the state in which a business operates, the number of its employees and its revenue. Also, keep in mind that the E&O policy is generally written so that legal defense costs erode the limit of coverage. Significant defense fees could limit or even exhaust the amount available for a settlement or judgment.
E&O insurance does not cover damage to your business’ property or injuries sustained in or on your property, which are claims suited to general liability or property/casualty coverage. In addition, E&O insurance doesn’t cover illegal activities and fraud.
E&O insurance covers your business for the professional services it offers to customers and clients, and any claims against those services. D&O insurance covers your business’ directors, officers and employees for the decisions they make on behalf of the business.
Yes, as the negligence pertains to the firm’s professional services.
Follow these steps:
- Notify your broker and carrier as soon as possible.
- Submit relevant documentation that includes a narrative of the events leading up to the claim.
- Anticipate the claim adjuster’s questions; provide the answers with your claim’s submission.
- Work with your broker to make sure the submission is complete.
Surety bonds protect a firm’s clients for their losses in the event you fail to perform as promised. E&O insurance protects the professional or business owner for the claim made against them when your professional service harms a third party such as a client.
