We have some good news and some bad news.
The bad news: Lawsuits, once a measure of last resort, are now commonplace in settling disputes.
The good news? You can protect yourself, and your business and reputation, by investing in professional liability coverage, also known as Errors and Omissions (E&O) insurance.
E&O insurance is supplementary liability insurance that enhances any business owner’s policy by safeguarding against catastrophic loss in the event of a lawsuit due to a negligent act, error or omission by the professional. In addition to claims of error, omission, or negligence, E&O insurance can also protect against slander, libel and breach of contract.
Who Needs E&O Coverage?
It is appropriate coverage for anyone who gives advice, makes educated recommendations, designs solutions, or represents the needs of others. Service professionals, such as accountants, computer consultants, software developers, photographers, planners, architects, real estate agents and contractors are just a few examples of business people who need E&O insurance.
Specialized forms of E&O coverage are also available to professions such as appraisers, real estate agents, insurance agents, home inspectors and notaries. Policies are designed to cover the large legal defense costs that are incurred trying to prove liability or innocence. They also ultimately cover the final judgment if the business owner does not win the lawsuit.
How Does an E&O Policy Work?
E&O coverage kicks in where your Commercial General Liability policy does not provide coverage, such as for service errors, contract performance disputes or any other professional liability issues. These policies also include defense costs, which can be high even if you are found not to be liable. Policies typically do not provide coverage for non-financial losses or for intentional or dishonest acts.
E&O policies generally have both a claim limit and an annual limit, which is based on the insured’s exposure. The claim limit is the maximum amount that will be paid for any single event, and the annual limit is the maximum that will be paid in any one year. Typical limits range from $250,000/$500,000 to $2 million/$4 million and differ depending on the type of business.
To be eligible for this specialized insurance, candidates normally have to have proof of licensure in their “covered class of business.”
Count on the Experts
There are many different forms of professional liability insurance and many things to consider when purchasing E&O coverage for your business. Because there isn’t a standard policy, an experienced agent who understands your company and can knowledgeably design a policy to meet your needs is invaluable. Call us today at (303) 721-1145 to learn how E&O insurance fits into your business plan and how it can protect you and your livelihood.