Should Business Owners get Errors and Omissions Insurance?

There are a lot of positions in the business world that require us to make subjective and tactical decisions. That may be because we’re a professional, like an architect or a consultant or an engineer, or it may be because we own a company and have a duty to shareholders and others in our company, to act diligently and responsibly.

But what if things go wrong? What if you make a mistake?

Errors and Omissions Insurance

It can be costly to make these kinds of mistakes, and the threat of being sued, can act as a deterrent from people doing what should otherwise be their livelihoods.

This is where errors and omissions insurance, or E&O insurance, comes into play.

As the name suggests, E&O insurance insures you for mistakes in judgment or for mistakes you make in your professional capacity that could lead to other people suing you for those mistakes. Most policies will protect you whether you are sued individually for actions that happened in your capacity as an officer of the company, as well as protect the company itself, if it is also sued.

Much like injury liability insurance, E&O insurance will not just pay claims for you (called indemnity), but also, will pay for an attorney to help defend you in court, assuming that the claim is something covered by your policy. Like all insurance policies, E&O coverage has exclusions, which you should know before you purchase any policy.

What Does it Not Cover?

E&O will usually not cover you for breach of contract claims, nor will it cover, protect or defend you from things like intellectual property infringement claims, or breaches of confidentiality agreements. Intentional or criminal activities, including fraud, usually are not covered either. Statutory wrongs may sometimes be covered but may not always be, depending on the policy—for example, violating the Fair Labor Standards Act or the Telephone Consumer Protection Act. E&O often will not cover employment law claims, like those for harassment or retaliation.

That’s not to say you can’t get a policy for any or some of these things—you can—it’s just that adding these coverages will increase the cost of the policy, and if they are not specifically added, they may not be covered by a standard base policy.

What About Malpractice Insurance?

Yes, some professions like doctors and lawyers, have malpractice insurance. But not every profession offers malpractice insurance. If yours does not, and others in the public (your clients specifically) rely upon your knowledge, advice, guidance and decisions, you may want to consider E&O coverage.

Before and After Coverage

Some policies will cover you for wrongs that you may get sued for, after your coverage lapses, so long as the alleged wrong happened while you were insured. Others will not. Most won’t cover you for wrongs that you get sued for, which happened before you even had coverage. Make sure you know and understand your policy to check on these “before and after” claims.

You should have legal help if you’re in a  position to make judgments and where others rely on you.  Call our Fort Lauderdale business lawyer at Sweeney Law P.A. at 954-440-3993 for help.

Source:

allstate.com/resources/business-insurance/errors-and-omissions-insurance