At one point or another, everyone makes a legal mistake. The problem is that when someone makes an error in their business it can end up being a costly one.
Errors and Omission insurance protects businesses from lawsuits that can result from mistakes like this. Here’s what it is, what it covers, and what to do if a claim must be filed.
Errors and Omissions Insurance: What Is It?
Errors and omissions insurance (also known as E&O) is insurance that protects businesses that provide services, advice, or guidance. Just as with many other small business insurance policies, E&O insurance is purchased through an insurance broker or company.
Depending on the industry, E&O insurance may go under a different name, such as malpractice coverage or liability insurance.
E&O insurance is useful for any business that provides a service that the client could potentially claim was tied to negligence or was performed inadequately.
It protects businesses against financial loss and claims. This type of insurance is vital for any business that provides services since it could be seriously damaged by a customer-initiated lawsuit — especially amid the current pandemic.
What Does E&O Protect Against?
There are several costs associated with defending a business against a negligence claim that E&O insurance covers. These include:
- Lawyer fees
- Administrative and court costs
- Defense costs
- Claims for past services provided
- Copyright infringement
- Damages and claims
- Temporary staff
- Independent contractors
E&O insurance normally covers costs up to a preset dollar amount. That amount is outlined in the terms of your policy.
If you have questions about the verbiage in your current policy, an experienced Florida claims attorney can be valuable. In the meantime, there are a number of common exclusions you are likely to find in the fine print for this type of coverage.
Common Exclusions for E&O Insurance
There are some things not covered by E&O insurance more often than not. Policies differ by the insurance carrier, but the most common exclusions include:
- Property damage or bodily injury (coverage usually found in general liability policies)
- Dishonest, fraudulent, malicious, or criminal behavior
- Infringement of trademark, trade secrets, or patents
- Insolvency of any party or bankruptcy
- Employee claims of work-related illness or injury, wrongful termination, or harassment
- Guarantees, cost estimates, breach of contract, or warranties
E&O policies must be read and understood thoroughly by any business before coverage is initiated. That way, the business understands what limitations and exclusions are a part of the coverage.
How to File an E&O Claim
Managing an E&O incident can be stressful, but it’s essential to focus on what needs to be done in order to clear the dispute and prevent further issues.
Taking the right steps swiftly ensures that your carrier can work on your behalf effectively. Filing an E&O claim requires that:
- The carrier is notified. The provisions found in E&O policies often have a filing requirement. All necessary forms and supporting documents must be submitted in order to initiate a claim with the insurance company in the specified timeframe.
- All claims are reported. Both actual and possible claims must be reported. Failing to do so will exclude coverage on any future incidents that may arise as a result of the possible claim.
- A complete picture is provided to the claims representative. Make sure to give them all the documents related to the claim available and a chronological narrative of the incident in question.
E&O incidents, when properly managed, are only a temporary part of the history of your business. Doing what must be done to effectively and efficiently move the claim through the proper channels can make a huge difference in the favorability of the outcome.
About the Author:
Andrew Winston is a partner at the personal injury law firm of Winston Law. For over 20 years, he has successfully represented countless people in all kinds of personal injury cases, with a particular focus on child injury, legal malpractice, and premises liability. He has been recognized for excellence in the representation of injured clients by admission to the Million Dollar Advocates Forum and named one of America’s Top 100 High-Stakes Litigators. Mr. Winston is AV Preeminent Rated by the Martindale-Hubbell Law Directory, enjoys a 10.0 rating by AVVO as a Top Personal Injury Attorney, has been selected as a Florida “SuperLawyer” from 2011-2020 – an honor reserved for the top 5% of lawyers in the state – was voted to Florida Trend’s ”Legal Elite,” recognized by Expertise as one of the 20 Best Fort Lauderdale personal injury attorneys, named one of the Top 100 Lawyers in the Miami area for 2015-2017, and one of the Top 100 Lawyers in Florida for 2015-2017 and 2019.