If you are uncertain about the difference between professional liability or errors and omission (E&O) insurance, you’re not alone.
While general liability insurance is primarily focused on property damage or bodily injury, errors and omissions insurance (aka professional liability insurance), protects you if a client claims that your services caused them to suffer a financial loss.
Many professional service companies such as Physicians, Lawyers, Accountant and Real Estate Brokers choose to purchase E&O insurance policies but E&O insurance can be a valuable coverage for many businesses outside of those we typically associate it with. If you give advice and recommendations, if you create programs or products for your customers, or if you provide a service, you may very well need Professional Liability protection.
Take for instance a computer consultant. Typically a consultant may create plans or changes to a system or change in technology the supports the computer system. The opportunities for an error abound, given the ever-evolving tech field. Yet, however diligent you may be to protect yourself through the use of a contract, you may still be subject to a suit.
One of the most important reasons to carry E&O coverage is for the defense cost. Even if the computer consultant can show the client signed off on all the changes, the cost to defend the lawsuit could put a small business out of business.
It’s important to note that almost all professional liability insurance policies are sold on a “claims-made” basis. This means that the insurance only covers work performed while the policy is in force, and for claims actually filed during the term of the policy. If you cancel your E&O insurance policy without arranging for an extended reporting period, your coverage would end, and any claims submitted after the cancellation would not be covered, even though the work was performed while the policy was in effect.
It’s also important to know that there are exclusions in every errors and omissions insurance policy. Before you purchase this type of policy, you’ll want to think about the most dangerous threats and professional risks for your business, and look for a policy that covers those specific risks.
Call us to discuss your needs or concerns so that we can craft an insurance solution for you.