What is E&O insurance?
Errors and Omissions (E&O) also professional indemnity is the insurance that covers your company, or you individually, in the event that a client holds you responsible for a service you provided, or failed to provide, that did not have the expected or promised results. For doctors, dentists, chiropractors, etc., it is often called malpractice insurance. For lawyers, accountants, architects or engineers, it may be called professional liability. Whatever you call it, it covers you for errors (or omissions) that you have made or that the client perceives you have made.
Most E&O policies cover judgments, settlements and defense costs. Even if the allegations are found to be groundless, thousands of dollars may be needed to defend the lawsuit. They can bankrupt a smaller company or individual and have a lasting effect on the bottom line of larger companies.
In short, E&O coverage provides protection for you in the event that an error or omission on your part has caused a financial loss for your client.
Who needs E&O insurance?
The best-known professionals who need E&O insurance are doctors, lawyers, accountants, architects, engineers, etc. However, less thought about individuals range from advertising agencies to commercial printers, product manufacturers, Web hosting companies to wedding planners etc., If you are in the business of providing a service to your client for a fee, you have an E&O exposure. You may want to consider what will happen if the service is not done correctly or on time, and it costs your client money or harms their reputation.
Why does my company need coverage?
To put it very simply, everyone makes mistakes. Even with the best employees and the best risk management practices in place, mistakes will be made. No one is perfect.
There is also the less tangible loss of reputation for both the professional and his client. What will the cost be to the business that now has equipment in South America instead of South Africa? Will they lose future contracts with their current client as well as future clients?
By not purchasing E&O a company can be taking a serious financial risk. These types of losses are not covered under a general liability policy. And, as stated earlier, even if you are not at fault, litigation is both time consuming and expensive.
When should you buy E&O insurance?
As with any insurance, the best time to buy an E&O policy is before the risk is taken. If you are in the service industry and you know you will have the exposure, make E&O insurance a part of your insurance portfolio. Many contracts with clients will require insurance to be in place. It gives them the peace of mind of knowing they will be compensated if there is an error or omission.
Where do you find E&O coverage?
There are no "standard" policy wordings for E&O coverage, there are different wordings for different Professions and Service providers. An attorney, a doctor and a computer programmer all have exposures; however, the same policy would not work for all. There is no "one size fits all" E&O policy.
Most E&O policies are written on a "claims made" or "claims made and reported" form. This means that any claims must be made or, in some cases, made and reported, within the policy period. These policies have a retroactive date that becomes very important. Claims that arise out of acts committed prior to the retroactive date will not be covered.
The policy covers Defense costs and Compensation excluding Fines and penalties
An insurance company underwriter may ask for copies of contracts, a description of quality control procedures, documentation procedures, training procedures, etc., along with completed Proposal.
Errors and Omissions (E&O) also professional indemnity is the insurance that covers your company, or you individually, in the event that a client holds you responsible for a service you provided, or failed to provide, that did not have the expected or promised results. For doctors, dentists, chiropractors, etc., it is often called malpractice insurance. For lawyers, accountants, architects or engineers, it may be called professional liability. Whatever you call it, it covers you for errors (or omissions) that you have made or that the client perceives you have made.
Most E&O policies cover judgments, settlements and defense costs. Even if the allegations are found to be groundless, thousands of dollars may be needed to defend the lawsuit. They can bankrupt a smaller company or individual and have a lasting effect on the bottom line of larger companies.
In short, E&O coverage provides protection for you in the event that an error or omission on your part has caused a financial loss for your client.
Who needs E&O insurance?
The best-known professionals who need E&O insurance are doctors, lawyers, accountants, architects, engineers, etc. However, less thought about individuals range from advertising agencies to commercial printers, product manufacturers, Web hosting companies to wedding planners etc., If you are in the business of providing a service to your client for a fee, you have an E&O exposure. You may want to consider what will happen if the service is not done correctly or on time, and it costs your client money or harms their reputation.
Why does my company need coverage?
To put it very simply, everyone makes mistakes. Even with the best employees and the best risk management practices in place, mistakes will be made. No one is perfect.
There is also the less tangible loss of reputation for both the professional and his client. What will the cost be to the business that now has equipment in South America instead of South Africa? Will they lose future contracts with their current client as well as future clients?
By not purchasing E&O a company can be taking a serious financial risk. These types of losses are not covered under a general liability policy. And, as stated earlier, even if you are not at fault, litigation is both time consuming and expensive.
When should you buy E&O insurance?
As with any insurance, the best time to buy an E&O policy is before the risk is taken. If you are in the service industry and you know you will have the exposure, make E&O insurance a part of your insurance portfolio. Many contracts with clients will require insurance to be in place. It gives them the peace of mind of knowing they will be compensated if there is an error or omission.
Where do you find E&O coverage?
There are no "standard" policy wordings for E&O coverage, there are different wordings for different Professions and Service providers. An attorney, a doctor and a computer programmer all have exposures; however, the same policy would not work for all. There is no "one size fits all" E&O policy.
Most E&O policies are written on a "claims made" or "claims made and reported" form. This means that any claims must be made or, in some cases, made and reported, within the policy period. These policies have a retroactive date that becomes very important. Claims that arise out of acts committed prior to the retroactive date will not be covered.
The policy covers Defense costs and Compensation excluding Fines and penalties
An insurance company underwriter may ask for copies of contracts, a description of quality control procedures, documentation procedures, training procedures, etc., along with completed Proposal.
