Who needs Errors and Omissions insurance?

The best-known professionals who need Errors and Omissions insurance (also known as E&O Insurance) are doctors, lawyers, mortgage brokers, accountants, architects, engineers, etc. However, advertising agencies to commercial printers, Web hosting companies to wedding planners should also consider E&O  coverage. If you are in the business of providing a service to your client for a fee, you have an E&O exposure. You may want to consider what will happen if the service is not done correctly or on time, and it costs your client money or harms their reputation.

Why does my company need coverage?

To put it very simply, everyone makes mistakes. Even with the best employees and the best risk management practices in place, mistakes will be made. No one is perfect.

Below are a few real-life examples of Errors and Omissions losses:

  • A Computer Consultant was hired to create a new computer system for a client. The client alleged that the new system was not functional and corrupted their current system.
  • A Mortgage Broker failed to process a loan application on a timely basis which resulted in the borrower losing an agreed upon rate. The rate increased and the borrower was unable to secure a comparable rate resulting in significant excess interest paid.
  • A Safety Consultant professional liability claim resulted when the claimant alleged the insured’s critical inspection report was not comprehensive enough to have prompted the client to take precautionary measures to avoid an explosion that resulted in injury and death.
  • A private school hired a Management Consultant to assist them with employee recruitment activities. The suit alleges the insured performed an inadequate background check and failed to identify the employee’s criminal history which included sexual assault on a minor.

By not purchasing Errors and Omissions insurance, a company can be taking a serious financial risk. These types of losses are not covered under a general liability policy. And, as stated earlier, even if you are not at fault, litigation is both time consuming and expensive.

*The above illustrate potential loss scenarios and are based on actual claims. Insurance coverage ultimately depends on the facts of each claim and the policy term, conditions & exclusions.