Errors and Omissions Liability Insurance, E and O

BackgroundBreach of contract.

To many individuals, business owners and professional’s surprise, basic or entry-level general or commercial liability policies and business owner policy’s (BOP) do not extend to an alleged or real error or omission of an individual, employee of a business or business entity. As a result, the errors and omissions insurance policy should be a major financial risk shifting method used by anyone who advises, consults, recommends, and works for or on behalf of another person or business.

What is an Error or Omission?

Should you be accused of or charged with an error or omission, a jury or judge will be the make the final decision. An error can broadly be characterized as an inaccuracy, a mistaken action, miscalculation in writing or math, a wrong statement that was relied upon or misrepresentation, commonly, a blunder, misdeed, fault or oversight may be easier to grasp.  An omission is something left out, not done or neglect. There is a wide range of business and professional matters or situations where you could be placed in a position to defend yourself. In particular, rightly or wrongly, should the party to whom you are advising or consulting have a financial lose for what every reason, they will look to all those in the process for monetary relief. 

What Does an Error and Omission Insurance Policy Do?

The primary reason for an E and O policy is EXTEND or EXPAND your liquid, physical, and future ASSET PROTECTION beyond the coverage found within your primary business insurance coverage’s. Legal liability from an unintentional  mistake, error or omission while transacting business with another will make you financially responsible to pay the party who brought the action against you. It’s important to understand and recognize a significant exception,  this coverage will only step in and be available to  you in a civil proceeding,  and not for a criminal allegation or act. Another important thing to understand that Errors and Omissions insurance does not protect for decisions of management which is another type of policy known as Directors and Officers ( D & O) Insurance.

Errors and Omissions Insurance Sounds Costly.

Like all insurance policies, there are many variables that will determine the final cost of your coverage. The dollar limit chosen or required, the industry risk, the revenue of your business or contract value, the physical place you conduct business or location your business operates from,  and the amount of self insurance you take on from the deductible chosen. There are other additional items and extended coverages that you may consider purchasing beyond the basic E & O coverage. The application is extremely important part of determining cost. The importance of a having an insurance broker/agent guiding and assisting you can not be overstated. In the event that you’ll need to call on your policy for your defense, the insurance company and details within policy will be the difference to your peace of mind as the conflict grinds through the courts and the legal bills pile up. Surprisingly, for most business,  the cost are relatively affordable and should be a part your  financial mitigation strategy as soon as the business has the cash flow to support the purchase.  In many contracting situations, the contracts will require specific limits and forms of coverage. It’s extremely important in the early stages of consideration with your prospect clients to find out the this requirements so you can include them in the agreement. We continually tell our clients to ask early and often for these details as you will have to figure this additional overhead into you agreement.

Final Thoughts

Once you obtain errors and omissions insurance use the coverage to strengthen your presentation especially to a new prospect. This coverage represents that you respect your prospects risks as well as your own.  Many professions and businesses can not even exist without errors and omissions in place i.e. lawyers, doctors, accountants are good examples. When it comes to other types of businesses you’ll find proponents and naysayers. Is this your career and future income for you and your family.  Do you have enough cash available to defend your actions should a claim be alleged? Have you called us to determine your industry exposure of litigation?  Peter Green Insurance Agency has the experience, understanding, and access to the leading regional, national and specialty errors and omissions insurance companies to address your specific industry and requirements.

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Peter Green Insurance Agency LLC – An independent headquartered in Costa Mesa, Orange County, Ca. 
Insurance brokerage and agents for errors and omissions insurance throughout California.