What Lawsuits Does Errors and Omissions Insurance Cover?
Errors & Omissions Insurance (also known as Professional Liability Insurance or E&O Insurance) can pay for your legal expenses when customers sue you over the work you've done for them.
E&O lawsuits can happen with nearly any of the goods and services that you offer. Professional Liability lawsuits happen when your clients allege you or your business:
- Made mistakes, poor judgments, or other errors
- Was negligent
- Didn't perform the service you agreed to
- Failed to complete work
- Delivered faulty, shoddy, or unsatisfying work
In other words, Errors and Omissions Insurance covers your business when your customers are unsatisfied or your work caused them a financial loss.
E & O Coverage Is Required in Many Contracts
Many contracts that you'll sign will specify a minimum amount of E&O coverage your business needs to have. Your clients and business partners want to know that your insurance is suitable to withstand a lawsuit. Because professional liability lawsuits can get expensive fast, Errors and Omissions Insurance is vital to keeping your business running.
Clients want reassurance that your business's services are protected with insurance. If you fail to deliver a product to a client, they'll want to know that your work is insured, and that an insurance company can pay for the damages or shortcomings of your work.
Options for the Cost of E and O Insurance
Professional Liability Insurance policies will vary according to your needs and your budget. Many of our customers purchase a policy that offers $1 million dollars' worth of coverage. Frequently, contracts specify that number, so small businesses often start there. Plus, Errors and Omissions Insurance is typically sold in million-dollar increments.
Your policy will also have a deductible, which can vary according to your needs. Some deductibles will be as low a thousand dollars, while others will be in the tens of thousands of dollars.
If you have any questions about how much coverage you need or what deductible makes sense for your business, contact one of our agents .
E&O Insurance is a Claims-Made Coverage
Claims-made insurance policies cover claims differently that other policies. Errors & Omissions Insurance only covers lawsuits that are about work you've done while you were covered by your policy, and only works while the policy is still active.
When someone sues your business for something you did a year before you purchased your coverage, your E&O policy won't pay for your legal costs.
When you switch E&O coverage to a new provider and leave your old one, you also lose coverage for all your old work. If a customer sues you for work that was covered by your old policy, your new policy won't cover you.
Many small businesses cover their professionally liabilities by finding one
provider and sticking with them. Your business can always add coverage to its policy in case new contracts and liabilities require you to purchase more.
These timing considerations are especially significant with E&O liabilities because lawsuits can happen well after you originally did the work, depending on statutes of limitations. Our agents can help you find a good fit for your E&O Insurance.
How Can You Get E&O for Less?
Many people mistakenly think that if they get an insurance policy on their own without consulting an agent they will skip the middle man and be able to get E&O for less. But that's not necessarily true.
Our agents can often get your insurance for less. Frequently, they can use their leverage with some of the top-rated insurance companies to get policies for cheaper than you'd be able to get on your own.
Our agents are also able to cut unnecessary coverages from your policies, which can save you money without sacrificing necessary coverages. Working with our small business insurance experts can be a smart way for you to get the coverage that won't break your budget.
Tips to Reduce your Professional Liability and Avoid Expensive Lawsuits
- Develop strong relationships with customers. Customers are much less likely to sue your business if they have a good relationship you. Relationships aren't just built by being friendly. Customers respect businesses that communicate clearly and present themselves professionally. When customers know what they are getting and know what things cost and why, they trust your work and respect your business.
- Have lawyers review your contracts. Lawyers are expensive. There's no getting around that. But you should have one look over your contracts. Ask them if there are stipulations they should add that will reduce your E&O or other liabilities. One clause in a contract could be the difference between a costly, time-consuming lawsuit and business as usual.
What Are the Limits of E&O Coverage?
No insurance offers your business complete coverage from lawsuits. If your customers sue your business because you've damaged their property or injured them, this liability is covered by General Liability Insurance and not your E&O Policy.
If an employee sues your business because they are injured at work, your business will need Workers' Compensation Insurance to cover that liability.
While no policy protects your business from all the lawsuits that could threaten it, Errors and Omissions is an important component of your coverage.
Online Insurance from the Small IT Business Insurance Experts
The BusinessInsuranceNow online insurance form only takes a few minutes to complete. Once you submit it, our agents will contact send you a free E&O quote. If you need to get Errors and Omissions Insurance to sign a contract, don't worry. You can get an insurance certificate from BusinessInsuranceNow in as little as 24 hours.