A Small Business Guide to Errors and Omissions

Chapter 1: Malpractice Lawsuits: The Basics
Part 2: Who Can Make E&O / Malpractice Claims Against Your Business?

Now that you know what errors and omissions claims are, let's talk about the people who make them. In short, anyone who doesn't work for your business can file an E&O claim against you if they feel they've been negatively affected by your work. Because errors and omissions claims revolve around the type of work that you do, it makes sense that the people who pay for your services are the ones filing these claims. These include:

  • Patients. If you are a doctor, massage therapist, nutritionist, or another healthcare professional, the people you treat and / or advise can file a malpractice claim against your practice. Here's a real-life case study [PDF] New browser window icon. involving a physical therapist and a woman receiving treatment after an ankle surgery. In order to relieve pain, the physical therapist placed a hot pack on the patient's ankle. Although the patient did not complain of the temperature during the session, she later reported a small burn on her ankle. She claimed the burn was inhibiting her ability to move, keep her daily exercise routine, and visit the beach. She sued the physical therapist for malpractice. The two parties came to a five-figure settlement out of court. In addition to the settlement, the therapist's legal defense fees were around $34,000.
  • Clients. If you are an engineer, real estate professional, or someone else who uses contracts or provides services, your clients can file E&O claims against your business. Take a look at this recent case, reported by New browser window icon., involving a famous architecture firm and the New York City borough of Staten Island. The city's Construction Authority filed a $1.4 million lawsuit against Ennead Architects (the firm that designed former President Clinton's presidential library), alleging that its "defective" design caused a recently constructed playground to crumble.
  • Customers. If you own a business that sells products or services to customers, know that they can sue you if they feel your work is not up to par. The Huffington Post recently reported New browser window icon. on a lawsuit against PetSmart regarding a grooming incident. An English bulldog puppy was allegedly strangled during a grooming session at the store. The business called the dog owners to report that the dog was vomiting blood. The pet owner took the dog to the vet, but it died shortly thereafter. The pet owner rejected a $2,000 check from PetSmart and filed a $25,000+ lawsuit instead.

As we've mentioned, an Errors and Omissions claim is just the first step on the road to a full-blown lawsuit. So what does being sued entail? Does it mean you broke the law? If the lawsuit goes to court, will you be tried as a criminal? In the next section, we explore these questions and more.

Unhappy customers are the #1 cause of errors and omissions claims.

Next: Part 3: Errors and Omissions Lawsuits: Civil, Not Criminal