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What is Errors & Omissions (E&O) Insurance and Who Needs it?

Oct 25, 2021 · 5 minutes to read

In business anything can happen, including accidents and mistakes. Even the most careful small business owners can experience them. While you may be able to salvage the situation before it impacts your client, this may not always be the case.

Errors and Omissions (E&O) Insurance Policy

That’s where Errors and Omissions insurance could help. These policies are designed to shield professionals against common legal claims that can have devastating financial consequences, especially for small businesses.

What is Errors & Omission insurance?

Also known as Professional Liability insurance, an Errors and Omissions (E&O) insurance policy protects your business against claims of negligence, misrepresentations, or mistakes. Clients typically make Errors and Omissions claims when they have suffered a financial loss of damage as a result of your services, products or employees.

It’s not uncommon for clients to sue businesses over lost revenue, alleged negligence, or bad advice. These lawsuits can be expensive, and the results are often financially devastating for small business owners. E&O business insurance can help protect your revenue and professional reputation against these and other common liability claims you may face.

Who needs Errors & Omissions insurance?

Errors and Omissions insurance can benefit a wide variety of occupations, from architects to personal trainers. It’s also frequently purchased by engineers, accountants, consultants, real estate agents, event planners, lawyers, and notary publics—just to name a few.

As you can probably tell, a lot of small business owners may need Errors and Omissions insurance! However, you might be unsure if E&O insurance coverage is something you should consider for your business. It may help to ask yourself these questions:

  • Do you provide clients or customers with advice based on your professional knowledge and expertise?
  • Does your business design custom solutions for clients or customers?
  • Do you offer a professional service?
  • Do you represent your client’s and customer’s interests on their behalf?
  • Do your employees perform any of the above tasks?

If you answered yes to one or more of the above questions, then E&O business insurance might be worth considering to protect your small business.

What does Errors & Omissions insurance cover?

Now that you better understand what Errors and Omissions insurance is, you might be wondering exactly what a policy can cover. Here are some of the most common claims that are generally included in E&O insurance coverage:

1. Financial Losses

One of the most frequent claims made against Errors and Omissions policies is that of financial loss. Clients or customers may allege that the service, advice, or recommendation you provided caused them to lose money. If you are found liable, the client would be awarded compensation for their claim.

Your E&O insurance coverage would cover this compensation, including if you are ordered to pay a settlement or judgement by the courts. It also covers your legal expenses, such as attorney’s fees and other court costs, relating to the case.

2. Personal Injury and Damages

Errors and Omissions insurance can also provide coverage for non-monetary claims. This can protect your business from allegations of slander or libel, as well as clients seeking compensation for emotional distress, pain, or suffering. The damage done to someone’s reputation can be difficult to put a dollar amount on, especially as it can take years to repair the harm that has been done.

This coverage should not be confused with General Liability insurance, which protects your business against third-party claims of physical injury.

3. Alleged or Actual Negligence

Professionals are often held to a high standard, both individually and compared to others in their industry or occupation. If a client doesn’t feel that you’ve met these requirements, they may make a negligence claim against you.

Claims of negligence can sometimes be subjective. You may have acted professionally, but the client might feel differently. Thankfully, Errors and Omissions insurance will protect you whether a claim has merit or not. Defending yourself against a baseless claim can be just as expensive as one that is justified. E&O business insurance can help ensure that a false accusation doesn’t put you out of business.

4. Copyright Infringement

Most companies and individuals are protective of their intellectual property. Using copyrighted work without the copyright holder’s permission could result in a lawsuit, even if it was an honest mistake. Many Errors and Omissions insurance policies will provide protection for these types of claims.

Related: What does Professional Liability insurance cover?

Errors & Omissions insurance for your small business

Protecting yourself and small business against common liability claims is important. Errors and Omissions insurance is one way to do this. A policy can provide compensation to your clients and cover your legal fees for court cases resulting from the professional services you’ve provided. Importantly, it can also give you the peace of mind to continuing working with confidence.

BizInsure can help you find an Errors and Omissions insurance policy for your small business. Call us today to receive quotes from leading insurers.

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