Being human, we all make mistakes from time to time. Since errors are inevitable, there’s an insurance that specifically covers professional mistakes and oversights: Errors and Omissions Insurance.
Errors and omissions (E&O) policies are typically purchased by consultants, brokers and agents and service providers in industries such as real estate, software development, accounting, law, engineering, medicine and architecture. Generally, errors and omissions insurance is customized according to industry.
When clients believe you did something wrong they can file a lawsuit, which is expensive for you whether or not you are found to be at fault. E&O protects business owners who are sued for:
- Professional negligence
- Professional mistakes
- Failure to deliver promised services
What Errors and Omissions Insurance Can Cover?
When your business is sued, an E&O insurance can pay for:
- Attorney fees – You’ll have to pay for attorney fees whether or not you’re found to be at fault.
- Court costs – A suit will also involve costs such as filing fees, postage, copies, transcripts, clerk and marshal fees, and so forth. These expenses can be considerable. It is up to the judge whether the defendant (you), the plaintiff (the person suing you) or both of you will pay these costs. The judge can also decide to waive court costs altogether.
- Settlements – Costs you pay when the person suing your business settles with you. In a settlement, you pay an agreed upon amount to the plaintiff if he or she ends the suit.
- Judgments – If you are found to be liable by the court, you will receive a judgment, which is the amount you must pay the plaintiff.
Should You Buy E&O Insurance Coverage?
Suits can cause a business significant financial damage if the company doesn’t hold an errors and omissions policy. Even if you are committed to always providing quality services, mistakes can be made. And even when no actual mistakes are made, a client can still decide you are at fault if they have a problem with your work. Unless you’re prepared to pay, at the very least, attorney fees and/or court costs and, at worst, a settlement or judgment as well, then O&E protection is a smart purchase.
Get coverage to protect your business. Select the kind that is appropriate for your specific industry here.