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Protect Your Business from Costly Mistakes with E&O Insurance
Protect Your Business with E&O Insurance Coverage
You put a lot of time, effort, and energy into your business, but nobody is perfect. In organizations full of real people, everybody makes mistakes, and oversights can happen at any time. That’s why it’s important to protect your assets with E&O insurance—a type of professional liability insurance that gives you financial protection against errors and omissions lawsuits. Need to compare quotes to find the best errors and omissions insurance policy for your business? Skip the hassle and allow us to do the hard work for you. For an instant quote, fill out your ZIP code in the box above and click “Get A Quote”.
How Can Professional Liability Errors and Omissions Insurance Protect Your Business?
You make a living from your profession, but it can also get you into trouble. No matter how careful you are, something can always go wrong. If an unhappy client blames you for a financial loss, they can decide to file an errors and omissions lawsuit against you.
Even if the claim is baseless and it’s not your fault, a costly legal battle can ensue, which can do serious damage to your business. With E and O insurance, you won’t have to pay everything out of pocket.
As we move further into the 21st century, E&O lawsuits seem to be on the rise. One high-profile case is Walmart vs. Tesla. In 2019 Walmart sued Tesla for “widespread negligence,” which led to its solar power systems repeatedly catching on fire.
Walmart, which signed a contract with Tesla’s solar business, SolarCity, in 2016, asked the court to order Tesla to remove solar panels from 240 stores in the US. The two companies eventually settled out of court, but not before racking up some hefty legal fees.
Another warning to anyone in the consulting business is Hertz vs. Accenture. The Hertz rental car company filed a $32 million lawsuit against Accenture, a giant in the IT consulting space. Hertz claimed that Accenture essentially misrepresented itself during the redesign of Hertz’s website.
These kinds of legal battles may be an everyday reality for a fortune 100 company, but for small to medium sized business owners, it could mean financial ruin.
What Does Errors and Omissions Insurance Cover?
It is designed to protect your assets from financial losses and costs resulting from a lawsuit brought on by a failure to perform contractual obligations. Charges range from fraud and negligence to breach of contract and misrepresentation.
Professional liability errors and omissions insurance pays for attorney fees, court costs, administered costs, and settlements and judgments up to the limit of your policy. It covers you and your employees and any subcontractors working on your behalf.
E and O insurance may also cover work that is lost or damaged in shipping. If you need more coverage, you can purchase additional benefits related to your specific business, like Media Liability and Network Security Liability.
Professionals need to be careful shopping for the best E&O insurance for your needs because benefits vary widely based on policy type and carrier. Make sure you work with someone that knows your business.
What Errors and Omissions Insurance Doesn’t Cover
The window of coverage begins on the retroactive date and ends after the extended reporting period (ERP). Errors and omissions insurance won’t cover anything that happened before the retroactive date of your policy or anything that happened after the ERP.
Temporary Employees – may or may not be covered.
Criminal Acts – such as intentional fraud are not covered, but the insurance will pay your defense until proven guilty.
Bodily Injury or Property Damage – any personal injuries or damage caused by your company. General liability insurance is designed to cover these types of risks.
Employee Injuries or Illness – E&O insurance does not cover these. Worker’s compensation insurance provides benefits to employees who suffer from a work-related illness. Many states require employers to carry worker’s compensation insurance.
Discrimination or Harassment – if you want protection from harassment or discrimination claims, you can get employment practices liability insurance.
Personal Assets of Corporate Directors and Officers – the assets of high-level officers and directors, along with their spouses, aren’t covered if another party personally sues them for misconduct or wrongdoing in managing their business. To protect yourself from this type of claim, you will need Directors and Officers Insurance.
Errors and Omissions Insurance Cost
Underwriters go over a lot of data when they weigh the risks of insuring you and the associated E&O insurance costs, but unfortunately there is no one-size-fits-all solution. Every business operates a little differently, and insurance companies consider this.
Errors and omission insurance costs are determined by several factors, including:
- Type of business – one of the most important things underwriters look at is the possible costs if you were found liable for loss or damages. Different industries carry different risks. Generally, the higher your risk of being sued, the higher the cost will be.
- Revenue – higher annual revenues come with a higher risk for lawsuits.
- Claims history – you will most likely pay higher E&O insurance costs if you have a long history of claims filed against you.
- Loss experience – likewise, if you were found liable for claims in the past, your insurance will cost more.
- Staff turnover – insurance companies look at high staff turnover as an indication of higher risk.
- Operating characteristics – if you run a tight ship, you have a better chance of getting cheap E&O insurance. Mitigating factors like using well-written contracts and properly training all your workers will help you get lower rates.
- Any optional riders or endorsements you add – extra coverage and changes to your standard policy can raise or lower E&O insurance costs.
- Location – minimum coverage limits vary from state to state, and those in places with higher limits will pay more.
- Selected coverage limits – policies may come with an individual limit and an aggregate limit. The limit is the amount that the insurance company will pay towards damages or settlements.
- The size of your company – the scope of your operation, as well as the number of people you employ, will have an impact on the price of your errors and omissions insurance coverage.
Companies that minimize the insurer’s risks will have an easier time finding cheaper E&O insurance than those that don’t. You can’t influence some factors like the industry you are in or your claims history, but there are things you can do to reduce costs, such as:
- Employee Training – you can reduce your exposure to lawsuits and lower your errors and omissions insurance coverage costs with risk management training programs.
- Quality Control –quality control initiatives are also a great way to mitigate risk. Check everything for errors. Ensure that you are using current, detailed contracts with clients and only employ insured subcontractors. Many problems arise from badly-written contracts.
- Choose Higher Deductibles –higher deductibles mean lower premiums. The downside is that you will pay more up-front if there is a claim filed against you, but if you aren’t worried about high claims, it may be worth it.
- Compare Quotes – compare E&O insurance quotes from at least three different companies to find the best policy. Keep in mind that the cheapest E&O insurance isn’t always the best; you will need to find a balance between price and the coverage you need.
Who Needs Errors & Omissions Insurance?
The most obvious candidates for E&O professional liability insurance are service professionals like accountants, IT consultants, engineers, contractors, software developers, etc.
You need E&O coverage if:
- Your clients or investors require you to have it to do business with them.
- You are part of a trade association that requires you to carry E&O insurance.
- You sell a product or service.
- You have personal assets that could be lost if a client sued you for negligent acts, errors and omissions, or wrongdoing.
- You or your employees give advice or services that could result in a financial loss to one of your clients.
The truth is that anyone who sells a service or product should consider protecting themselves with E&O insurance.
Find Affordable E&O Coverage with EINSURANCE
At EINSURANCE, we have helped business owners find answers and peace of mind for over 25 years. Protect your business from risk and find the most affordable E&O insurance quotes from highly-rated companies with us. To get an instant quote, fill in the box above with your business’ zip code and click “Get A Quote”.
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