How to make an errors and omissions claim

Errors and omissions insurance (E&O), also known as professional liability insurance or professional indemnity insurance, covers claims related to mistakes, oversights, or negligence in your professional services.

Even if the accusations are invalid, an E&O lawsuit could cause substantial damage to your small business. As a key part of your risk management plan, errors & omissions insurance coverage would include legal defense costs, judgments, settlements, court costs, and other legal fees.

Dealing with a client dispute can be stressful, but filing an errors and omissions claim is relatively simple. Here are the steps you can take to get started:

Whether you uncover a mistake made by your company or an unhappy customer accuses you of negligent services, it’s crucial to contact an insurance professional right away. Acting quickly in these situations is key for two reasons:

1. Some insurance policies require you to report a claim within a certain amount of time.
2. If you can’t settle the dispute, the situation could escalate into an errors and omissions lawsuit.

Your insurance agent will ask you to submit a Schedule B Professional Liability Claims Information Form with the following details:

• Incident date
• Client’s name and contact information
• A description of the services provided
• The allegation(s)
• Any communication you’ve received from your client or their representative

Be sure to ask your insurance agent or provider any questions you might have about the process, including:

• Are there time limits for filing a claim?
• What are your options if it becomes a lawsuit?
• How can I reach the agent assigned to my claim?
• When can you expect a follow-up?

It’s important to understand exactly what your E&O insurance policy covers—and doesn’t cover—in your situation.

Type of policy

Knowing the difference between occurrence and claims-made policies is crucial for small business owners. Most professional liability policies are claims-made, meaning they only cover incidents that arise and are reported while the policy is active.

However, if you have an occurrence-based policy, any incidents that take place during the policy period are covered, regardless of when they’re reported. General liability insurance policies tend to be occurrence based.

Coverage limits

You need to know how much your insurance carrier will pay on a claim, including liability coverage limits per claim and the maximum amount your provider will pay for all claims in a policy period.

To estimate your out-of-pocket costs, you’ll need to know the deductible you’ll have to pay before E&O coverage applies.

Exclusions

Your policy may not cover certain activities, unique circumstances, or types of damages, including bodily injury or property damage. For example, an E&O policy may exclude coverage for claims that arise from services you provided that are outside the scope of your standard professional offerings.

The insurance provider representative who handles your case should be able to answer questions about the claim. This will be a different person than your agent, but both will be good resources during the filing process. You may want to ask your representative:

• What does the policy cover?
• Are there time constraints for filing the claim?
• Is this particular incident covered?
• What are my options if this becomes a lawsuit?
• How can I get in touch with the agent assigned to my claim?
• When can I expect a follow-up?

When a customer dispute arises, documentation is your best friend. The more information you can provide, the faster your insurance company can assess the situation and process your claim. 

Types of records to include:

• Photos, videos, or other visual evidence
• Contact information for all parties involved
• Client contract
• Invoices and payments received
• Client emails, texts, and other correspondence
• Employee or witness statements
• Document services provided

You can strengthen your position by providing organized, easy-to-understand documentation, including a written timeline of events leading up to and including the claim.

Now’s the time to talk to an attorney. Seeking legal advice early in the process can help you understand whether the claim is valid, what your options are, and if there are ways to reduce your liability.

Keep in mind, certain types of businesses and service providers might be more susceptible to liability litigation. A lawyer who’s familiar with errors and omissions coverage can also advise you on any professional liability risks specific to your field. For example:

• A new homebuyer could sue the real estate agent for a miscalculating the home's square footage on the MLS sheet, and the error wasn't uncovered until after the sale was final.
• Clients could sue a financial planner for failing to disclose or the misrepresentation of an investor conflict of interest.

Once you’ve filed your claim, you should avoid speaking directly with the claimant. Your insurance provider can handle all of your inquiries to avoid any statements or interactions that could impact the outcome of your case.

Select the attorney and insurance representative that will best represent the interests of your small business. Finally, be sure to fully cooperate with your insurance agency, promptly providing documentation and other requested information that can help ensure that your claim gets resolved quickly.

Depending on the severity of the situation, most claims can be sorted out in a matter of days or months. However, if your E&O dispute goes all the way to trial, you’re looking at years of litigation, not to mention the financial losses and reputational damage your small business could face.

If you run into any issues during the claims process, you can contact an Insureon agent who can help you find your policy information or answer any questions you have. We can also help you get a certificate of insurance whenever you need one.

To get free quotes for small business insurance from top-rated providers, complete Insureon’s easy online application today. We only work with trusted, A-rated carriers, which means you can depend on them when it's time to make a claim on your policy.