You might have bought a traditional business owners or general liability insurance policy that may cover losses related to bodily injury, property damage, personally injury and even advertising injury. However, what happens when you or your employees provide a service that a client claim is inadequate or negligent or damaging. For example, if you are a real estate agent, you may find yourself facing a lawsuit if your client finds defects in the property after closing the deal and accuses you of concealing the defects. Here is another example – You may face damage compensation charges when a plumbing repair, that your employee had attended to, fails and causes an entire office to be flooded. Issues like these cannot be resolved by a traditional general liability insurance policy, and this is where professional liability or errors and omissions (E&O) insurance comes in.
What is E&O insurance?
E&O insurance is a professional liability insurance or professional indemnity insurance that protects companies and their workers, or professionals, against claims if a client sues for negligent acts, errors or omissions committed during business activities that results in a financial loss. Common claims that professional liability insurance covers are negligence, misrepresentation, violation of good faith and fair dealing, and inaccurate advice. E&O policies are generally set up based on a claims-made basis, meaning that the policy covers only those claims made during the policy period.
Who needs E&O insurance?
Simply put, if you are a professional or own a company that provides an advice or service to a client, E&O insurance will be beneficial to you. Architects, accountants, contractors, insurance agents, nutritionists, therapists, general maintenance companies, real estate advisors, lawyers, wedding planners and marketing advisors are just a few of the examples of occupations that need E&O insurance. Note that even if the court or arbitration panel finds your client’s accusation as unwarranted, the legal fees and related expenses can be very high, and E&O can help you defray such expenses.
What does E&O insurance cover?
E&O insurance covers a range of expenses your business may incur when a professional liability claim is made against it. This typically include settlements, judgements, attorney fees, court costs and administrative expenses. However, it will not cover illegal acts and purposeful wrong doings. It also does not cover third party bodily injury or property damage claims made against your businesses, or employee injury claims – which are well covered in other insurance policies. Having E&O coverage helps professionals and companies avoid a substantial financial hit or even bankruptcy. Fortunately, there is a good range of products and credible providers of E&O in the insurance market. We, at Texas P&C Insurance, can help you understand your professional liability risk and suggest the right E&O insurance policy at the right cost. You can call us on 800-903-8690 or contact us online here.