Running a service-providing business involves a great amount of risk, and things don’t always go smoothly. You make mistakes as a business owner, your employees make operational mistakes, and sometimes you do everything right but deals and operations still take a turn for the worse. If you own a small business, consider E & O Insurance (also known as Errors & Omissions Insurance or Professional Liability Insurance). This is a type of professional liability insurance that protects personal services businesses from claims for negligence, failure to perform, and inadequacies regarding services provided to clients. It can cover the company, workers, and individuals. Policies usually cover court costs and settlements up to a specified amount.
The following is a more comprehensive list of the items E&O Insurance typically covers:
· Defense costs
· Negligence (alleged or actual)
· Temporary staff
· Independent Contractors
· Claims and damages
· Claims from past services
· Personal injury (libel, slander, etc.)
· Copyright infringement
These items are not typically covered by E & O Insurance:
· Employment matters
· Bodily injury
· Property damage
· Leak of Personal Information
· Trade secrets
· False advertising
Regulatory groups such as FINRA, company investors, real estate brokers, and companies in various other specific trades are required either federally or by state to obtain a certain amount of E & O insurance, but often opt for additional coverage from what is required, in order to further protect themselves. Insurance brokers, financial advisors, and other finance professionals are also highly encouraged to obtain E & O insurance. Clients often sue whoever they can when their financial decisions do not pay off. If an investment goes badly, they may go after their advisor or broker, even if the associated risks were specified ahead of time and the investment fit the parameters established by the client him/herself. Even if a court or arbitration decision finds in favor of the advisor or broker, they are left with costly legal fees. For situations like these, and numerous others, E & O insurance is crucial.
As mentioned before, the coverage and benefits of this type of insurance varies based on the specific policy and the company issuing the policy. Coverage depends greatly on specific details about the individual or business entity applying for coverage. For example, individuals or companies with a history of high numbers of litigation disputes are considered to have a high underwriting risk and will likely find more limiting terms of higher costs in their E & O coverage. Please speak to one of our experts about E & O coverage for your business, and the coverage specifications. Better safe than sorry!