What You Need to Know About Errors & Omission Insurance
Errors & Omissions insurance is a kind of liability coverage that is primarily used by professional businesses and services to protect themselves against damages and liabilities that may be caused by the operations of those professional services.
Similar to (and sometimes referred to interchangeably as) Professional Indemnity Insurance (PII) and Professional Liability Insurance (PLI), errors & omissions insurance typically covers claims of negligence or mistakes made in the course of providing professional services or that fail to meet contractual requirements, etc.
If you provide any type of professional service, then you probably need some sort of E&O coverage. Early professional liability coverage was generallyrooted in malpractice protection and was largely used by doctors and lawyers for example, but today a huge variety of professionals, contract workers, and service providers in a wide range of fields have come to rely on this type of coverage as a standard business practice.
E&O coverage, as the name implies, specifically addresses errors and omissions that you or an employee/representative/agent of your business may make in the course of providing a professional service. Errors are distinguished from omissions in that errors are an active form of negligence in which something that should not have been done is in fact done, while omissions are a passive form of negligence, in which something that should have been done was not in fact done. There often can be a lot of overlap in any given case of negligence that blurs the distinction between what qualifies as error vs. omission, and although the name implies that the whole gamut from active to passive negligence is covered, terms and coverage scope can vary significantly from policy to policy.
There are any number of variations of E&O insurance available on the market today, in part because there are so many professional fields and industries that depend on E&O insurance to manage their liability exposure, and each of those fields has unique considerations that must be accounted for when crafting policies tailored to their specific needs.
As these policies have evolved and become increasingly customized for each given profession/industry, it has become increasingly beneficial to work with a broker or agent who specializes in your field, but there are some common questions that anyone considering E&O insurance ought to raise when evaluating potential policies. For example, what is the scope of the coverage,what kind of remedies are provided, and what period of time will the policy cover.
Scope essentially addresses what actions are and are not covered, so the more specific a policy holder can be in terms of anticipating potential areas of risk and liability in advance, the more efficient and effective the policy will be.
In terms of remedies, some policies will offer exclusively monetary support while others may provide more specialized remedies like legal representation in the event of a lawsuit or other interventions suited to the issue at hand.
Determining the timing of the policy coverage is crucial. Some policies will only cover events/actions that occur when the policy is active if the claim is made while the policy is active, while some policies may take effect retroactively to cover current and future liability for past actions. There are also policies with what’s known as a‘tail’ intended to cover future legal liability for acts committed while the policy is active even after the policy is terminated in the event of delayed harm or legal action.
There are a couple questions that may be helpful to ask when determining what the coverage that is best suited to your professional needs. Are there any errors, omissions, negligent actions or mistakes of any kind that you or a representative of your business could conceivably make that might result in harm to clients or third parties who in turn might pursue legal redress? It is because the answer to this question is ‘yes’ for so many businesses, independent contractors, and professional service providers the E&O insurance has become so universally adopted.
Getting Errors & Omissions coverage is easier now than ever before. Because it’s become so widespread and increasingly specialized, there are E&O packages to cover all the peculiar risks and liabilities that accompany each professional service industry.
Thankfully, the E&O brokers and agents have become increasingly specialized as well to help people navigate those options. And finding an agent with direct experience tailoring policies for professionals in your industry is incredibly simple with searchable databases that allow you to locate brokers and agents and sort them by whatever criteria is most relevant to you - like expertise, location, rating, etc.
Getting some form of E&O coverage has become practically essential for professionals in the modern era. As that coverage has evolved to suit the needs of various industries as it’s been incorporated into the business models of service providers ranging from sole proprietors to international giants, many variations and options have become available on the market. But with searchable databases and an understanding of the risks your business undertakes in the normal course of operations, finding the right broker and the right policy to fit your needs is incredibly easy to do.