The current business world operates at an incredibly fast pace, and this means that occasionally, companies make mistakes. This is especially true of industries such as law and pharmaceuticals that often involve complex concepts and sophisticated jargon. Companies in all industries can gain from this insurance, but especially those in high risk industries. One seemingly small clerical error may have potentially severe consequences and be quite costly. For situations such as these, errors and omissions (E&O) insurance can be extremely beneficial. So, what does errors and omissions insurance cover?
Errors & Omissions Coverage
Standard E&O insurance coverage includes court costs and attorneys fees, administrative costs and settlement fees. This type of insurance typically covers four different kinds of errors: accusations of negligence, work mistakes and oversights, undelivered services and missed deadlines. Let’s look at each of these types of errors more closely.
Negligence Or Accusations Of Negligence
If any employee within your business has been careless and has failed to adhere to minimum industry standards for any reason, the client involved could accuse your organization of negligence and potentially sue you. A negligence lawsuit can often be filed when a large number of customers have their personal information (names, phone numbers, social security numbers, credit card details, etc.) exposed in a massive data breach. If there is sufficient evidence to prove that your business could have prevented this type of incident, you could likely end up facing a negligence lawsuit. According to software company Bitdefender®, 20% of registered breaches in 2019 were due to employee negligence.
Inaccurate Or Late Service Delivery
If your business fails to deliver promised goods or services on time or at all, this can significantly affect your client’s business. Even if the service is delivered on time but it turns out to be of a lower-than-promised quality, this can also be an issue, as your client may likely consider abandoning you and doing business with another company instead. (The client may view you as unprofessional).
Mistakes & Oversights
In certain cases, even a small error or omission can cost your client money. Failure to clearly relay to a client a special rule or exception in a contract or other agreement, for instance, can be viewed as a form of oversight. The client could claim you misled him/her when describing the types of services you offer. In order to recover its losses, the client may file a lawsuit against your company. Errors and omissions insurance assists with payment for relative legal costs.
Missed Deadlines
Similarly to late delivery of services, missing a deadline can lead to losses for a client in the form of revenue or loss of brand image in certain cases. Applicable deadlines for submission may include a business proposal or an offer to purchase or it may include the filing deadlines for legal matters.
What E&O Insurance Does Not Cover
As beneficial as errors and omissions insurance is, it does not cover all types of mistakes or incidents. Here are three claims E&O insurance does not cover.
Client & Employee Injuries
If one of your employees or clients sustains an injury or illness due to work performed, E&O insurance is not applicable. Instead, workers’ compensation insurance will typically cover medical expenses or even possibly loss of income.
Property Damage
If your company’s property becomes damaged in any way, (e.g. due to a fire or flood) a business owner’s policy (BOP) is the correct policy to cover the cost of repairs. There are typically two different forms of BOPs: standard and special.
Employment Discrimination Lawsuits
If one of your employees (or job candidates) is unjustly fired, mistreated or rejected because of his/her gender, race, religion or sexual orientation, this person may file an employment discrimination lawsuit. E&O insurance will not cover the corresponding claim; employment practices liability insurance (EPLI) will cover any related legal costs instead.
Speak To Experienced Business Insurance Brokers
Reach out to the experienced business insurance brokers at Pro Insurance Group in Elgin, Illinois for more information on errors and omissions insurance and how this can help your company. We proudly serve as one-on-one advocates for each of our clients and are dedicated to helping them obtain coverage plans that fit both their needs and their budget.
Common E&O insurance coverage includes court costs and attorneys fees, administrative costs and settlement fees. Although nearly any type of business can benefit from this type of insurance, insurance brokers, lawyers, medical professionals, financial advisors and real estate agents can particularly benefit from E&O insurance. Call Pro Insurance Group today at (833) 619-0770 or contact us online to request a quote or to learn more about our services.