Errors and Omissions Insurance
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What does errors and omissions insurance cover?

If a dissatisfied client sues your business over a work mistake, errors and omissions insurance can cover your legal expenses, including the cost of a settlement or judgment.

Errors and omissions insurance (E&O) provides coverage for:

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Work mistakes and oversights
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Undelivered services
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Accusations of negligence
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Missed deadlines

Work mistakes and oversights

Even a small professional error or oversight could end up costing a client money. When the client tries to recoup their losses by suing your business over the mistake, errors and omissions insurance helps pay for your legal costs.

Example: A real estate agent makes an error on an MLS sheet, incorrectly listing a home’s square footage as more than it is. The homebuyer realizes the error after purchasing the home and sues the agent. The real estate agent’s E&O policy covers the cost of hiring a lawyer and the eventual court-ordered judgment.

Undelivered services

If your business leaves work unfinished, it can interrupt your client’s business plans. When you fail to deliver promised services, a client could sue – especially if it negatively impacts the client’s bottom line.

Example: An insurance agent fails to procure adequate commercial auto insurance coverage for a client, despite promising to do so. When the client gets in an accident and goes to make a claim, they’re surprised to find themselves uninsured. They sue the insurance agent for failing to secure the appropriate coverage.

Accusations of negligence

If your business fails to meet minimum industry standards while working with a client, the client might sue your business for negligence. A dissatisfied client could still sue for negligence even when there’s nothing wrong with your work.

Example: A client hires a network security company to protect their customer data, but a data breach exposes the names and credit card details of thousands of customers. The client believes the network security company should have been able to prevent the incident and files a negligence lawsuit.

Missed deadlines

If your business misses a deadline, it could delay your client’s business plans and result in lost revenue. If a client sues your business over late work, errors and omissions insurance can cover the cost of the lawsuit.

Example: A tax preparer fails to file a client’s tax return before the deadline and now the client is forced to pay a costly fine. To recoup the fine, the client sues the tax preparer for missing the filing deadline.

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Errors and omissions insurance does not cover:

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Customer injuries or property damage
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Employee injuries
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Damage to business property
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Employee discrimination lawsuits
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Vehicles used by a business

Customer injuries or property damage

If a client is accidentally injured at your office or you damage a client’s property, general liability insurance will help pay the cost of the client’s medical care or the cost of repairing or replacing their property. This policy can also cover your legal expenses if the customer sues.

Example: A client falls and breaks an arm in your insurance agency. Your general liability policy can cover the cost of medical expenses, including physical therapy and medications. If the customer refuses your assistance and opts to sue, your policy can help cover the cost of hiring a lawyer and other legal expenses.

Employee injuries

If one of your employees suffers a work-related injury or illness, then workers' compensation insurance can cover their medical expenses, as well as partial lost wages for the time they take off work.

Example: One of the real estate agents working for your agency is injured while performing a routine property inspection. The agent needs medical attention and time off work to recover, so you turn to your workers’ compensation insurance to cover the cost of the doctor’s visit, physical therapy, and partial wages.

Damage to business property

If your business property is damaged, destroyed, stolen, or lost, then the property coverage included in a business owner’s policy (BOP) can pay to repair or replace the affected items.

Example: A fire destroys your IT consultancy office, burning servers and other important equipment. The property insurance in your business owner’s policy could cover the cost of rebuilding the office and replacing the burned equipment.

Employee discrimination lawsuits

If a job candidate or employee sues your business for harassment, discrimination, or wrongful termination, then employment practices liability insurance (EPLI) can cover the cost of your legal fees, as well as the cost of a settlement or judgment.

Example: A real estate agent accuses your agency of routinely giving male agents the properties with the highest commissions. She initiates a gender discrimination lawsuit against your company and you turn to EPLI to cover your legal costs and eventual settlement.

Vehicles used by a business

Personal auto insurance policies almost always exclude business use. Business-owned vehicles must be covered by commercial auto insurance and personal or leased vehicles used by a business should be covered by hired and non-owned auto insurance.

Example: An employee at your janitorial services business gets into a car accident in your company’s van on his way to a client’s office. Your commercial auto insurance policy helps cover the cost of the damaged property.

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