Does your business need errors and omissions insurance? To answer this question, you must first understand what E&O insurance is. Basically, it is a professional liability insurance meant to protect businesses from claims made by customers for negligent actions and inadequate service. E&O policies cover both settlements and costs incurred by the suits. It is thus evident that all businesses need E&O insurance because:
Irrespective of your industry, if you are in business, you are supposed to offer high quality of service to your clients. Moreover, if you are a professional (lawyer or doctor) your licensing terms will include the quality of your work standards. In some businesses, it may not even be clear what is meant by “high quality.” The problem is that if your clients feel that they have not received quality work from you, they can sue you for their loss. In fact, this is true whether or not your profession has official (published) codes of conduct. When this happens, your E&O coverage will protect you or your business from the consequences of the lawsuit.
Everybody makes mistakes. Even if you have a code of conduct for your business and you follow it to the letter, who is to say that you won’t make a human error? If you are a plumber, you might use a wrong type of pipe during installation. As a computer technician, you might install a piece of bad software in your client’s computer or even introduce a virus into the system. These are human mistakes that can happen to anybody, but your clients will not leave them as such. When sued, you may be required to use a lot of resources to settle the damages. This can be financially crippling, more so if yours is a small business.
It May be a Requirement
In some cases, business owners might not even have a choice on whether or not to have E&O insurance. There are industries that are required by law to be covered for errors and omissions. For example, contractors in different industries are often required to have E&O insurance to cover both property damage and bodily injury they incur on others in the course of their work. In some cases, it is your clients who will insist on E&O coverage, in which case you don’t have a choice but to have it.
You Don’t Have To Be Wrong To Be Sued
If you make a professional mistake and you are not insured, the consequences can be devastating. But then again, you don’t have to make a mistake to be sued. You would be surprised by the number of frivolous lawsuits pending in courts. Your clients can even sue you for perceived errors, and those kinds of cases may not be easy to handle without insurance. Remember, E&O insurance also covers legal fees.
The insurance industry is constantly evolving, and one often needs the advice of experts to navigate it successfully. If you have questions about Errors & Omissions insurance, do not hesitate to contact Insurance By Design at 972-499-3414 for more information.