Errors and Omissions (E&O) Insurance: What Does It Cover?

Being part of an industry that provides professional advice or services, it is likely that you could benefit by obtaining E&O insurance. Although, it is not a requirement for everyone to carry this coverage, it is worth considering for more adequate protection of your business. This type of policy offers coverage, usually in amounts of $1,000,000 or more per occurrence, if a third party decides to take legal action against your business or your employees due to mistakes or negligence. Those in the medical field, such as doctors and dentists, are required to carry malpractice insurance, which is another name for an errors and omissions policy. Lawyers and attorneys will also commonly carry this insurance to protect themselves against lawsuits. Not only limited to the above occupations, most businesses can find this coverage to be practical – accountants, engineers, software developers, graphic designers, etc.…

The main difference between a common general liability policy for your business and an errors and omissions policy is that the former covers claims that deal with bodily injury, property damage, and personal or advertising injury. If a lawsuit is filed against you, the errors and omissions policy is designed to cover you for defense costs, claims arising from past services provided, copyright infringement, and negligence, just to briefly summarize. Of course, as with any other insurance policy, there will be exclusions as to what is covered specifically. Be sure to fully understand and read through the exclusions! You can always ask your agent if you are not sure what is covered, and coverage forms detailing the policy can usually be provided for your review.

Typically, the coverage limits are shown in a set of two numbers. $1MM/$1MM indicates that the policy will cover up to $1,000,000 per occurrence and $1,000,000 aggregate. This is a common coverage amount, but if you feel that you require more coverage, you may request higher limits. Depending upon your type of business, each policy should have coverage specific to each profession as well. As an example, a business providing IT consulting work might have software copyright infringement coverage included in their policy. E&O policies are normally made on a claims-made basis, meaning that they are designed to cover claims that are reported during the given policy period, regardless of when the claim occurred. To obtain a quote, a simple call to your agent to fill out an application is all that you will need to get started.

Kristen Nadel is a broker/agent at Fairfax Insurance Services.

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