E&O Insurance

In the fast-paced world of business, mistakes and misunderstandings are inevitable. Errors and omissions (E&O) insurance, also known as professional liability insurance, is essential for safeguarding your business and reputation. This coverage protects you if a client claims you made a mistake in your services, potentially leading to financial losses and lawsuits.

Why E&O Insurance Matters

Unlike general liability insurance, which covers bodily injury and property damage, E&O insurance addresses claims related to professional services or advice that result in a client’s financial loss. It covers legal defense costs, settlements, and judgments, even if the case lacks merit.

Who Needs E&O Insurance?

Professionals offering services for a fee should consider E&O insurance. This includes accountants, consultants, real estate agents, healthcare operators, and more. Some states and licensing boards require it, and clients may also demand proof of coverage.

Types of E&O Policies

E&O insurance can be written as claims-made or occurrence policies. Claims-made policies cover claims reported while the policy is active, while occurrence policies cover claims for incidents that occurred during the policy period, regardless of when the claim is filed.

Retroactive Date

If claims-made, the retroactive date in an E&O policy is crucial. It specifies the earliest date from which coverage applies. Claims arising from incidents before this date are not covered. When purchasing E&O insurance (Professional Liabililty), consider the retroactive date carefully, especially if you’ve been in business for some time.

Common Exclusions in E&O Policies

While E&O insurance provides valuable coverage, it’s essential to understand its limitations. Here are common exclusions:

1. Dishonest, Intentional, Malicious, or Criminal Acts: E&O policies exclude claims arising from dishonesty, intentional wrongdoing, or criminal acts. For example, if a law firm intentionally misses a court deadline, it falls under this exclusion.
2. Bodily Injury and Property Damage: E&O insurance won’t cover claims of bodily injury or property damage brought by third parties. These are typically covered by general commercial liability (GCL) policies.

Cost and Coverage

The cost of E&O insurance varies based on factors like industry, revenue, and risk profile. On average, small businesses pay between $500 to $1,000 per year. To get the best rates, seek multiple quotes and maintain a clean operating history.

Conclusion

E&O insurance is a crucial investment for any business offering professional services. It provides peace of mind and financial protection, allowing you to focus on what you do best.