Errors and Omissions Insurance doesn't cover…
- Intentional wrongdoing or harm.
- Illegal acts.
- General liabilities.
- Employee injuries.
- Employee lawsuits.
- Property damage.
(To learn more about what E&O coverage can address, read "What Does E&O Insurance Cover?")
Okay, so Errors and Omissions coverage isn't a silver bullet for the risks your business faces. But there is usually a small business insurance policy for most problems your business may face. Let's take a closer look at what Errors & Omissions doesn’t cover and which policies can fill the gaps.
1. Intentional Wrongdoing or Harm
Let's say you opened a small antique shop right before the recession. It seemed like a great idea at the time, but no one really wants to buy a 16th-century armoire when they can barely afford to pay their electric bill.
Desperate for money, you come up with a quick scheme. You have a valuable Italian painting in your shop that you decided to replicate by painting multiple fakes to sell as real at a steep discount.
Deceiving your customers isn’t a wise move. Not only will it ruin your shop’s reputation, but it could also land you in court. Plus, no business insurance policy can cover intentional wrongdoing.
2. Illegal Acts
You scrap the fake painting idea, but you’re still strapped for cash. There’s an authentic Chinese porcelain urn insured for $85,000 in your gallery. You pay two kids $20 to run around your store and knock into the urn, sending it shattering to the ground. You file a claim to get the insurance money, but the claims adjuster smells a fish and the claim is denied.
For the record, E&O coverage doesn't include insurance fraud. No policy covers illegal activity.
3. General Liabilities
Say a leaky pipe near the front of your shop creates a puddle of water. As a client walks in with a crystal chandelier to place on consignment, she slips on the puddle and breaks her ankle. Your E and O coverage won't pay for the lawsuit that follows (or a property damage claim over the broken chandelier).
You need General Liability Insurance for that.
Also known as "slip-and-fall insurance," General Liability can protect your antique shop from third-party lawsuits over bodily injuries, advertising injuries, and property damage. (For more on the difference between these two policies, read "General Liability Insurance vs. Professional Liability Insurance.")
4. Employee Injuries
You have a wonderful, meticulous assistant to help you clean your fragile inventory twice a week. Your assistant gently dusts every hanging lamp, chandelier, and lantern in the shop. One day, she loses her balance on the stepladder and falls to the ground, breaking her wrist. She needs medical treatment and time off work, so you'll need to pay for her lost wages and hospital bills.
Errors & Omissions Insurance won't cover the expenses, but Workers' Compensation Insurance probably will.
5. Employment Disputes
With your assistant unable to work, you look to hire a temporary replacement. One of your applicants is a woman who doesn’t communicate effectively. After interviewing a few other candidates, you select a teen with after-school availability.
That woman you decided not to hire? She threatens you with a discrimination lawsuit, claiming you passed on hiring her because of her age. Employment Practices Liability Insurance is your go-to policy here, not E&O Insurance coverage.
6. Property Damage
Your nifty little antique shop is located in an old factory space, giving it an industrial charm. Unfortunately, some of the electrical wiring isn't up to code and a fire breaks out, destroying your shop, art, antiques, and priceless items.
You need a Property Insurance policy to reimburse you for these losses, not E & O coverage. Property Insurance can cover business property, inventory, and supplies lost or damaged by theft, fire, and some weather events.
To discover what E and O coverage can do, check out "How Does E&O Work? An Errors and Omissions Primer for Small-Business Owners."