What is Errors & Omissions (E&O) Insurance Coverage?

BUSINESS INSURANCE


Nov 3, 2020

What does an E&O policy cover?

Businesses, regardless of size or industry, are constantly exposed to a variety of daily risks. They protect themselves with Commercial General Liability Insurance to cover losses related to bodily injury or property damage thinking it’s an all-encompassing cover-all for any and all eventualities. However, the reality is that it’s likely not. What happens if a claim is not the result of either bodily or property damage? But rather, it is a result of professional liability. That's where Errors and Omissions (E&O) coverage comes in. E&O Insurance can cover claims arising from failure to provide the expected service level, or financial loss from wrongful acts that would not be covered under your Commercial General Liability Insurance. Think of it as the intangible ways your business could damage someone, like an accountant making a miscalculation and causing their client to lose money. This coverage is also crucial because even if a claim is unfounded and is simply an allegation from an unhappy customer, you will still need the coverage to protect your business and to provide financial support for legal fees.



How Does An E&O Claim Work? Errors and Omissions Claims Examples:

Freelance Graphic Designer

  • Inserts typographic errors on a Theatre Client’s show bill

  • The Theatre files a claim for reprinting costs

Mortgage Broker

  • Invests mortgage on behalf of client (lender). Mortgage defaults and loses lender their investment on sale of property

  • Lender sues broker for failure to assess borrower’s repayment ability on mortgage loans and for failing to accurately assess property values.

Translator

  • Incorrectly translates legal forms

  • Client files a claim for extra expenses incurred to re-translate the forms

Architect/Engineer

  • Calculation error means space allotted for staircase was insufficient to allow it to be built to by-law code

  • Requires a significant redesign at a heavy cost to fit in a proper staircase

Employment Agency

  • Fails to check if a job applicant has the proper credentials such as an education degree or relevant work experience

  • Client files a claim for damages and expenses incurred from hiring an unqualified job applicant



How Does E&O Insurance Work? How Much Does E&O Insurance Cost?

In each of the above cases, an unprotected related incident plus associated legal fees has the potential to cause significant financial damage to the responsible party, to the extent that it may cause operations to cease and force you to permanently close the doors of your business. An E&O policy provides the necessary coverage and defence for financial losses, even for alleged negligent acts, errors, or omissions arising out of your professional services - including advice.

Prices can vary but the premiums associated are usually, fairly correlated with the size of a company and can often be paid monthly - to alleviate cashflow burden.



Learn even more about E&O Insurance - how much you need, who needs it and more.



For most professional services or businesses, Errors and Omissions Insurance (E&O) is highly recommended to cover for the things your Commercial General Liability policy can't. If you're not sure your business needs E&O Insurance, our Foxquilt team can help! We provide tailored, smarter Business Insurance solutions customized to your specific business. Our experienced team of professionals can review your scenario and business to provide a plan built for your unique needs. It's important to have the right policies in place, like E&O, to fully protect you but it's also key that you're not overpaying for unnecessary coverages too. Start your own customized online quote today with Foxquilt.

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