Errors or omissions in your work
Basic mistakes that happen in the course of business that negatively affect others
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Errors & Omissions Insurance
Even the most careful business, entrepreneur or professional can be sued for unintentional errors. Occasionally, allegations can be leveled against companies without having made an obvious mistake, which can still be costly to defend against in court. Errors and omissions (E&O) insurance is a type of professional liability coverage - sometimes called professional indemnity insurance - that covers the legal fallout resulting from employee mistakes or perceived errors in services provided to clients.
Working with a team of skilled insurance brokers like Ansay & Associates to acquire adequate E&O coverage provides peace of mind for companies and professionals in the event of an inadequate work or negligent action claim.
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E&O Insurance
What it's Used For
Legal claims covered by errors & omissions insurance (along with its variants) are typically the result of strict liability or negligent torts against a professional or business that failed to meet expected professional standards. For example, a realtor may fail to disclose the age of a home’s furnace, which could open them to litigation if it were to fail suddenly. In the event of this type of litigation, E&O insurance provides recompense for things like:
- Attorney and legal fees
- Other expenses relating to the claim, including court costs
- Costs and expenses related to a court settlement
- Costs and expenses related to a judgment
Business Insurance
Professional Liabilities Covered by E & O Insurance
Error & Omissions insurance can cover legal fees and court costs incurred in defending against accusations of a wide range of business errors, depending on the specific plan. Most plans cover legal fees of suits resulting from mishaps that are most common in the course of doing business.
Common Business Mistakes Covered by E&O Insurance
Breaches of contract
Deliverables falling short of what’s promised
Undelivered services or missed deadlines
Delays resulting from illness, material damage replacements, etc.
Professional negligence
Accounting errors, misprints, blueprint errors, etc.
Inaccurate advice
When professionally delivered advice fails to pan out as planned
Failure to disclose
Risks associated with services and products or lack of clear usage instructions upon hiring or selling product
What it Doesn't Cover
Errors and omissions insurance has some limitations as far as covering legal fees, including:
- Types of legal damages covered by different forms of insurance, like property damage or injury.
- Criminal acts
For Instance...
E&O Insurance Claim Examples
Errors and omissions coverage applies to a wide range of professional services and can provide coverage in the face of myriad claims brought by a client.
Examples of Claims covered by Errors & Omissions
Example 1
Real Estate
A realtor fails to disclose important details about a home they’re trying to sell. This could result in a home buyer filing a negligence claim against the realtor.
Example 2
Finance
A financial advisor provides investment advice, without disclosure of risk, that results in a loss. Their client may file a claim against the advisor or their compan
Example 3
Construction
A remodeling company installs the wrong color flooring by mistake. The homeowner could sue for breach of contract and to pay for correction of the error
Example 4
Manufacturing
A manufacturer fails to include an important step in one of its product’s assembly instructions. Purchasers could file a claim based on the omission of information and to repair or replace the product.
Who Needs E&O?
Professionals Typically Covered by E & O Insurance
While there’s no telling what an unhappy client or customer might try to bring to suit, there are several professions that are uniquely vulnerable to the types of legal actions covered by errors & omissions insurance (and its variants):
- Real Estate Agents/Realtors
- Accountants
- Lawyers
- Notaries
- Healthcare Professionals
- Tax Preparers
- Travel Agents
- Home Inspectors
- Media Companies
- Contractors
- Architects
- Insurance Agents
E&O Insurance Compared to Similar Coverages
In the insurance industry, similar or even identical coverages can be referred to by different names, making the jargon difficult to parse out correctly. Errors & omissions insurance is a good example of a coverage type that spans many industries and is known by different names. It is also similar to related offerings and protections, but may function differently. As a professional at risk for these types of lawsuits, it’s important to understand these differences, similarities and policy overlaps.
Got questions or want to learn more? Contact us today - we're here to help.
Malpractice Insurance & Professional Liability Insurance
Professional liability, malpractice insurance and error & omission coverages are largely the same types of coverage, just known by different names. The difference in terms depends on the industries that are being covered by the policy. The connotations typically break down this way:
- E&O insurance: term used by firms serving the real estate and IT industries, among others
- Professional liability insurance: term used by professionals like accountants, architects, notaries, and consultants, among others
- Malpractice insurance: term used by professionals in the medical and legal sectors, among others
E&O Insurance vs. Surety Bond
While both a surety bond and E&O insurance are related to mistakes and malpractices in the professional realm, they protect different parties in public disputes. Essentially, a surety bond protects the public from a professional’s actions, and E&O insurance protects the business from absorbing the cost of certain types of lawsuits from the public.
How Much for Coverage?
Cost Factors for Errors & Omissions Insurance Coverage
Similar to most business insurance offerings, the cost will vary depending on a number of characteristics of the insured party, including:
- Your industry
- Where you do business
- Size of contracts
- Claims history
- Level of risk
- Amount of coverage needed
Expert Errors & Omission Advice from Experienced Brokers
Ansay’s business insurance advisors and brokers will guide you and your business to the appropriate professional liability coverage, regardless of your industry. Our team will help you secure the most cost-effective coverage to protect against the potentially exorbitant legal expenses associated with negligence claims, so you can focus on running your business.
Contact our team today to learn more about E&O insurance.
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