An Errors and Omissions (E&O) claim is a legal allegation against a professional or a business for financial loss resulting from negligent actions, inadequate or inaccurate advice, or failure to deliver services as expected.
Such claims typically arise when someone asserts these mistakes or omissions led to damages, such as loss of income or operational disruptions, without involving bodily injury or property damage.
E&O Insurance provides coverage for such claims.
Helping your clients understand how an E&O Insurance policy works and why they need one is one of the most valuable services you can give them.
What Is E&O Insurance Coverage?
Professional E&O Insurance is specialized coverage protecting against claims of negligence, errors, or failures in providing services.
E&O Insurance covers potential financial loss incurred through legal costs associated with defending and/or settling a claim, up to the specified policy limit.
An E&O Insurance policy ensures professionals can navigate legal challenges without facing devastating financial repercussions. By securing this type of insurance, professionals can enjoy the peace of mind they need to focus on delivering quality services.
Common E&O Claims
Understanding common types of claims related to E&O can help professionals and businesses recognize their vulnerabilities and take proactive steps to mitigate risks.
Negligent Advice
Claims of negligent advice arise when a professional offers guidance or information that leads a client to make poor decisions, resulting in financial loss. For example, financial advisers who give inaccurate investment strategies or legal advisers who provide incorrect legal counsel can face such claims.
Failure to Deliver Services
Some claims arise from alleged failures to fulfill contractual obligations or to deliver promised services. A marketing agency doesn’t execute a campaign on time, perhaps, or a software developer fails to deliver a completed product by the agreed-upon timeline.
Errors in Professional Services
Professionals may face claims for such simple errors as incorrect data entry, miscalculations, or inaccurate reporting. For instance, accountants who file incorrect tax documents or architects who misinterpret building codes may encounter claims.
Breach of Confidentiality
In industries involving the sharing of sensitive information, breach of confidentiality claims can occur. Perhaps a lawyer leaks privileged information about a client, or a consultant accidentally exposes proprietary data to unauthorized parties.
Misrepresentation
Misrepresentation claims arise when a professional misstates facts or provides incomplete information, leading clients to make misguided decisions. This scenario is common when a buyer believes a real estate professional has exaggerated a property’s features or benefits.
Product Liability for Services
While product liability typically pertains to physical goods, service providers can face claims related to services they render. For example, an IT consultant whose professional advice leads to software failure may be held responsible for resulting losses and financial harm.
What Does E&O Insurance Not Cover?
While E&O Insurance provides essential coverage for professionals, it is crucial to understand coverage limits and exclusions. Typical exclusions include:
Intentional Wrongdoing
E&O Insurance does not protect against claims arising from intentional acts or fraudulent behavior. Furthermore, charges, fines, or penalties resulting from criminal activities are not covered.
Bodily Injury and Property Damage
Claims involving physical injuries or property damage are generally excluded. For those types of risks, businesses need General Liability policies.
Employment Practices
Claims relating to wrongful termination, discrimination, harassment, or other employment issues fall outside E&O Insurance. Organizations need separate Employment Practices Liability (EPL) Insurance for these risks.
Contractual Liabilities
If a professional assumes liabilities under a contract exceeding what would be expected under common law or statutory obligations, an E&O Insurance policy may not cover those claims.
Prior Acts
E&O policies usually include a “claims-made” provision, meaning coverage applies only to incidents arising after the policy’s inception date.
How to Avoid E&O Claims
Even clients who fully abide by all laws, rules, and regulations may find themselves facing expensive defense costs and legal fees if forced to defend against such a claim. However, professionals and businesses can take proactive steps to mitigate the risk of E&O claims:
- Maintain open communication with clients, establishing clear and realistic expectations
- Document all actions by saving emails and maintaining detailed logs of services provided
- Remain current with industry standards
- Practice quality control measures
- Carry adequate E&O Insurance
Who Needs E&O Insurance?
Any individual or organization providing professional services and advice should consider obtaining E&O Insurance.
Healthcare
Organizations in the healthcare industry face different regulations than other businesses face. Clients needing this insurance coverage include:
- Hospitals
- Physicians groups
- Biotechnology companies
- Medical research companies
Allied Healthcare (AHC) E&O
Often called “Miscellaneous Medical,” this coverage applies to a mix of medical-related risks that don’t fall under a Medical Malpractice policy. Types of businesses needing AHC E&O include, among many others:
- Adult daycare centers
- Drug rehab centers
- Nursing
- Occupational, physical, and speech therapy
- Home health agencies
Architects & Engineers (A&E) E&O
Even small projects can result in large, complicated claims involving multiple parties. In addition to licensed architects and engineers, professionals who need A&E E&O include:
- Construction and project management
- General contractors
- Land surveyors
Financial Institutions and Financial Services
Such institutions as banks and such professions as securities brokers and dealers face particularly complex exposures. Businesses needing this type of coverage include:
- Investment advisers
- Fund managers
- Financial advisers
- Accountants
- Tax preparers
Multimedia
Multimedia E&O covers publishers and broadcasters against claims of intellectual property (IP) infringement, breach of an IP license, defamation, and negligent publication. This coverage benefits:
- Newspapers and magazines
- Advertising agencies
- Website owners publishing a large amount of content
Technology
Technology E&O covers claims of negligence in providing software or services. Businesses that would benefit from this coverage include:
- Contract software developers
- Software licensing
- IT consulting
- Website developers
- Hosting companies
Miscellaneous E&O or Miscellaneous Professional Liability (MPL)
This “catch-all” coverage is for professional risks that don’t fall into some other specific category. For example, this coverage is for:
- Management consultant to trustee
- Staffing agent to collection agent
- Printer to freight forwarder
Cyber & Privacy Liability Coverage
Any business or organization using technology runs cyber-related security risks. With laws and regulations constantly changing, it can be difficult to determine your client’s true exposure. A Cyber & Privacy Liability policy can help ensure your client is protected in the event of a cyber attack.
ProWriters Helps E&O Insurance Brokers
When you register as a ProWriters broker, you have a partner who can help you secure the best E&O Insurance solutions at competitive rates.
You’ll be able to use our Digital IQ Comprehensive Rate Platform, which lets you quickly research quotes from top insurance companies for policies that precisely meet your needs.
You also have access to free educational resources and a team of experts who can answer your questions and give you reliable guidance as you navigate the complexities of Errors and Omissions coverage.
Register with ProWriters online today, or call us at 484-321-2335.
