What Are Errors & Omissions?
Errors and omissions is a form of business liability insurance. It helps protect businesses and professions who give advice or perform services. It is also known as professional liability insurance. If your business fails to perform your professional duties or there are claims of negligence against you, this E&O coverage will help protect you.
Why Do I Need it?
Even if you are not in a traditional “profession” such as a lawyer, doctor, or practitioner, an E&O policy will help protect you. For example, if your business installs software and afterwards your client makes a claim that your software never worked, then E&O insurance would help protect you. If you business performs any type of service, something may go wrong and it’s important to have Errors and Omissions Insurance to help cover you when that happens.
What are the different features of an E&O policy?
Though errors and omissions coverage can vary depending on your industry and needs, they have common features. Keep in mind that there is no “standard” Errors and omissions policy. It can differ from business to business. To get the best coverage for your business, talk to your insurance agent. They will be able to assess your business for its need and find the policy that best suits you.
Most errors and omissions policies are “claims made”. This simply means that the coverage is limited to the claims made during the policy’s active period. Be careful because there are certain policies that limit coverage to the claims that were reported during the coverage period.
You should also be aware of the retroactive date. This date indicates the beginning of the coverage period. Therefore, the policy will only cover claims that occur on or after the retroactive date.
The specific terms and language used in the E&O agreement is important to consider. For insurance, if the term “pay on behalf of” is used, then your insurance provider will pay the costs directly, rather than paying a reimbursement to you. Another example is “negligent act”. This refers to the error or omission that your business committed. It can also mean that did not perform your professional service. Be mindful of language that is used in the agreement because it can directly affect your business.
Defense coverage is the portion of an E&O policy that states your insurer will pay for the defense expenses. If this is not included in your E&O coverage, then expect to pay defense posts out of pocket. In some cases, defense coverage can reduce your policy limits! It’s a good idea to think about this or ask your agent how defense coverage works in your E&O policy!
What are the common exclusions?
While each Errors and Omissions policy can differ, they usually have these common exclusions
- Fraudulent or criminal acts
- Illegal profits
- Property Damage
- Bodily Injury
- Wrongful acts or claims under an old policy
- Wrongful acts that occurred before the inception date
- Fee disputes
There are some additional E&O exclusions. Again, speak to your insurance agent so you know exactly what is and is not covered in your policy.
An Errors and Omissions policy will help protect your business. Even if you are not a doctor and don’t require a specialized insurance policy, you should still get E&O coverage. Sometimes things don’t go as planned and someone may make a negligence claim against you. These claims can be expensive if you don’t have an insurance policy. It’s always a good idea to call up your agent and ask about this coverage. They can help find the right coverage for your small business.