The Ins and Outs of Errors and Omissions Insurance

Regardless of the type of small business you're running or even the industry you're operating in, organizational disagreements can quickly spiral out of control. This is true whether you're talking about a disagreement between two or more parties in the same business or multiple separate companies.

In an effort to make sure that your own business is covered against these types of unexpected expenses, get errors and omissions insurance. Also commonly referred to as E&O insurance for short, errors and omissions insurance brings with it a number of clear benefits that cannot be ignored.

What is Errors and Omissions Insurance? Breaking Things Down

New call-to-actionAt its core, errors and omissions insurance is a type of professional liability insurance. Like most policies, these have a very narrow focus. They help to protect not only businesses but also the employees who work there and other assets associated with the company from any claims against them. Claims could include things like the inadequate completion of work, negligent actions, related accidents, and more.

In other words, it's a way to protect everything that you've already worked so hard to build from financial ruin.

As is true with most types of insurance, an E&O policy isn't necessarily for everyone. Having said that, any organization that provides a service to their customers or other consumers could benefit from the protection that E&O insurance has to offer. That includes not only professions where the stake is very high like doctors and lawyers but also insurance agents, financial services providers, and others.

If you're a financial services provider, for example, someone could easily file a claim saying that they lost money due to your negligent actions. Someone could file a claim against an insurance agent saying that they were sold the wrong policy or that they were misled about what they were really buying. These types of situations are all too common and E&O insurance can help protect against all of them.

What Does Errors and Omissions Insurance Cover?

While errors and omissions insurance policies will vary depending on the provider, they all generally include coverage for a few core areas. These include ones like the following:

  • Negligence. Note that this includes any claims of negligence that are filed against the small business in question for work completed or services provided. So in the case of someone like a lawyer, the claim would have to do with legal services that have already been performed.

  • Errors in services given. This area would include any mistakes that employees made during the course of work provided or services rendered. If a lawn care company is hired to come cut down a tree, and they accidentally cut down the wrong one, that would be just one example. This also includes oversights by the company or any errors related to the type of services being provided.

  • Omissions. This includes any instances in which important or otherwise valuable information (or services) is not provided when they should be provided. In the context of an insurance agent, an example would be if someone was sold a policy without being expressly told that it did not offer flood coverage and that this would need to be purchased separately.

  • Misrepresentation claims. This can include any misrepresentation related to the company's (or employee's) skills, the services that they are capable of providing, any guarantees that have been made, or their abilities. In essence, this is a situation where someone says they can provide a service effectively and correctly knowing full well that they likely can't.

  • Violation of Good Faith and Fair Dealing. This category includes instances in which the company in question does not do what they promise to do. If a contractor signs an agreement to build a deck on the back of someone's house for a certain amount of money using high-quality materials only to complete the project with lower-quality alternatives, that would be a Violation of Good Faith and Fair Dealing.

  • Inaccurate advice. This is particularly beneficial to consultants and others who provide specific advice to clients. An example of this would be a stockbroker - if you try to sell a particular stock to your clients knowing that it likely won't perform as well as you say it will, that would be inaccurate advice.


What Doesn't E&O Insurance Cover?

Of course, as is true with any insurance policy, errors and omissions insurance does not cover absolutely everything that might happen over the course of running a business. Just a few of the situations that are not covered include:

  • Any illegal acts that are performed by either yourself or your employees, or any other purposeful wrongdoing that people engage in.

  • Any bodily injury that occurs or property damage that happens.

  • Injuries or illnesses that occur to employees over the span of doing their jobs.

  • Any proven situations of discrimination or harassment that take place.

  • Damage sustained from a data leak includes any costs associated with the misuse of important customer or client information.

How Much Does E&O Insurance Cost?

The amount you will be expected to pay for E&O insurance depends largely on the type of policy you get and the provider you choose to go with. A number of different factors will go into the overall cost of your policy, including but not limited to ones like:

  • Business risk. If yours is the type of small business that is more likely than average to have a claim filed against you, you will need to pay more for your insurance policy.

  • Coverage limits. This will be dictated largely by the kinds of claims that can be filed. The higher the coverage limits, the more money your policy will cost.

  • Claim history. If you've been in business for several years and have never had a claim filed against you, you will end up paying less than someone with a long history of claims for things like negligence.

  • Location. Some areas are considered to be "higher risk" than others and thus businesses operating in those areas will need to pay more for coverage.

In the End

Overall, errors and omissions insurance is about more than just adding yet another policy to your organization. It's about protecting everything that you've poured your heart and soul into up to this point, regardless of what life happens to throw at you.

To find out more information about E&O insurance, or to get your errors and omissions insurance quote, please don't delay - contact Arnold Insurance today.Subscribe-to-the-Arnold-Insurance-blog


Back to Blog