Mistakes happen. It’s true in every facet of life, and that includes running your business. Unfortunately, any professional can be sued or held liable for honest mistakes made in the normal course of conducting business. In our litigious society, errors and omissions insurance is a good safety net for many types of businesses.
What does it cover?Errors & omissions (E&O) insurance – also called professional liability – can protect professionals from defense costs and damages stemming from lawsuits related to their services. Even frivolous lawsuits can be costly to defend and settle, and you need quick access to experienced and affordable defense counsel to help get them resolved efficiently and favorably.
While E&O coverage is usually not mandatory for most professionals, it is required to obtain certain financial services licenses and may be contractually required by your clients or vendors. Even absent any such requirements, it is still a good idea to carry some limit of coverage if you are providing a service to others.
An E&O policy is written on a base professional liability form that includes definitions, exclusions, and other explanations of your responsibility and the insurer’s responsibility. Underwriters may attach a series of endorsements to the policy that mold the coverage to fit your business. It is important to pay attention to the endorsements, which may enhance or restrict your coverage. It is also imperative to read the policy carefully and comply with all claim reporting provisions. Many E&O policies require notice of any lawsuit or demand during the policy period in order for coverage to apply. Failing to report a claim in a timely manner could result in a denial of coverage down the road.
