WHAT DOES ERRORS AND OMISSIONS COVER?
ERRORS AND OMISSIONS INSURANCE PROVIDES PROTECTIONS FOR:
Work mistakes and oversights
Undelivered services
Accusations of negligence
Missed deadlines
Mistakes in reports that cost your clients money
Even a small professional error or oversight could end up costing a client money. When the client tries to recoup their losses by suing your business over the mistake, errors and omissions insurance helps pay for your legal costs and if found necessary, indemnifies and makes restitution on your behalf.
REAL ESTATE AGENT POTENTIAL MALPRACTICE MISTAKES
Failing to disclose a property defect
Breach of duty
Representing clients in unfamiliar territory
Giving legal advice
Misleading clients
Breach of contract
Failing to keep your clients’ data safe
Failing to recommend inspections
Negligence
Undelivered services
If your business leaves work unfinished, it can interrupt your client’s business plans. When you fail to deliver promised services, a client could sue – especially if it negatively impacts the client’s bottom line.
Example: An insurance agent fails to procure adequate commercial auto insurance coverage for a client, despite promising to do so. When the client gets in an accident and goes to make a claim, they’re surprised to find themselves uninsured. They sue the insurance agent for failing to secure the appropriate coverage.
ACCUSATIONS OF NEGLIGENCE
If your business fails to meet minimum industry standards while working with a client, the client might sue your business for negligence. A dissatisfied client could still sue for negligence even when there’s nothing wrong with your work.
Example: A client hires a network security company to protect their customer data, but a data breach exposes the names and credit card details of thousands of customers. The client believes the network security company should have been able to prevent the incident and files a negligence lawsuit.
MISSED DEADLINES
If your business misses a deadline, it could delay your client’s business plans and result in lost revenue. If a client sues your business over late work, errors and omissions insurance can cover the cost of the lawsuit.
Example: A tax preparer fails to file a client’s tax return before the deadline and now the client is forced to pay a costly fine. To recoup the fine, the client sues the tax preparer for missing the filing deadline.
ERRORS AND OMISSIONS INSURANCE DOES NOT COVER:
- Customer injuries or property damage
- Employee injuries
Damage to business property
- Employee discrimination lawsuits
- Vehicles used by a business
- Contingent bodily injury
- Customer injuries or property damage
If you accidentally damage a client’s property or a client is injured at your office, general liability insurance will help pay for the client’s property or medical care. This policy can also cover your legal expenses if the client sues.
Example: A client falls and breaks an arm at a digital marketing agency. General liability insurance covers the client's medical bills, including physical therapy and medications. If the client decides to sue, it can also cover legal costs like settlements and judgments.
EMPLOYEE INJURIES
If an employee suffers a work-related injury or illness, workers' compensation insurance can cover their medical expenses, as well as partial lost wages for the time they take off work.
Example: A property manager is injured while inspecting an apartment building. He needs medical attention and time off work to recover, so he turns to workers' compensation to cover the cost of doctor’s visits, physical therapy, and partial wages.
DAMAGE TO BUSINESS PROPERTY
If your business property is damaged, destroyed, stolen, or lost, then the property coverage included in a business owner’s policy (BOP) can pay to repair or replace the affected items.
Example: A fire at a web hosting company damages computers, servers, and other important equipment. A BOP helps the company quickly replace the damaged property.
EMPLOYEE DISCRIMINATION LAWSUITS
If a job candidate or employee sues your business for harassment, discrimination, or wrongful termination, then employment practices liability insurance (EPLI) can cover the cost of your legal fees, as well as the cost of a settlement or judgment.
Example: A real estate agent accuses an agency of routinely giving male agents the properties with the highest commissions. She files a gender discrimination lawsuit against the company, which uses its EPLI policy to cover legal defense costs and pay a settlement to the agent.
VEHICLES USED BY A BUSINESS
Most states require commercial auto insurance for all business-owned vehicles. If your business uses personal or rented vehicles instead, you'll need to purchase hired and non-owned auto insurance.
Example: An IT consultant is driving his own car with a client in it. He rear-ends a pickup at a stop sign. When the other driver sues, the consultant's hired and non-owned auto insurance helps pay his legal bills.
CONTIGENT BODILY INJURY
Product liability insurance can help your business pay for lawsuits over contingent bodily injuries – which are client or customer injuries indirectly linked to your professional service.
Example: A freelance software developer helps a healthcare company develop a health monitoring application for its patients. A glitch in the program contributes to a patient injury. When the healthcare company sues, the developer turns to product liability insurance.
ERRORS AND OMISSIONS EXCLUSIONS
E&O insurance has exclusions that limit the scope of its coverage. For example, it won't pay for lawsuits that allege discrimination or abuse against clients.
It also only covers lawsuits filed against your business by clients. If you file a lawsuit against a client who refuses to pay you, E&O won't provide coverage.
Unless your policy has prior acts coverage, it will only cover claims filed while the policy is active and for incidents that occurred after you bought it.
You can fill the gaps in your E&O coverage with insurance endorsements. To make sure you have the coverage you need, contact an Insureon agent.