How to make an errors and omissions claim

An errors and omissions insurance policy, also known as professional liability insurance, can cover lawyer's fees, judgments, settlements, and court costs when mistakes or oversights lead to legal trouble. Because it's a claim-made policy, make sure to keep it active for protection against client lawsuits, especially if you give advice or offer professional services.

So, why is this policy so important? Put simply, you could meet all of your professional obligations and still get slapped with an E&O lawsuit from a disgruntled customer who claims your work simply wasn’t up to standards.

Many professional liability claims are based on a client’s perception and other subjective factors, rather than the actual quality of your work. Even a claim that's dismissed or dropped will still cost your business time and money.

You'll need to stay on top of the claims process to resolve a dispute without a significant impact to your business. These seven steps for business owners can make the filing process easier.

If you think you’ll have to file a claim on your E&O insurance policy, review your E&O certificate of liability insurance and write down as many details about the possible claim as you can remember. Your insurance provider will need to know:

• Your name
• Business name
• Current contact information
• Policy number and type of coverage
• A description of the claim
• When you first learned about the incident

It’s important to be as fast and thorough as you can with this information. The terms of your E&O coverage could be affected if you don't report an incident as soon as you learn of it.

Generally, it’s also a good idea to set aside funds for your policy’s deductible, and make note of what your insurance covers and your coverage limits, in case you do have to file a claim.

Calling your insurance agent should be the next item on your to-do list. Whether you learn of a mistake that your company made or you're named in a lawsuit, contact your agent right away. Often, the agent will recommend that you call your insurance carrier even if you haven’t been sued yet. Early notice allows the insurance company to quickly investigate and resolve a claim, as part of your insurance coverage.

Most E&O policies specify how quickly you must notify your insurer that you’re being sued. Failure to deliver this news within the given timeframe could result in the company denying your claim.

Many errors and omissions policies not only help pay for your legal defense. They can also help you find a lawyer who specializes in professional liability claims.

Also be aware of the statute of limitations in your state. An incident that you forget about after a week could result in lawsuit years later, so it’s important to keep your insurance agency informed.

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?

If you are sued, documentation will be your best bet for a successful legal defense. As a rule, you should keep detailed records of your professional activities and actions, especially when interacting with clients.

If you have contact with the person suing your business, document any form of communication, such as:

• Phone calls
• Emails
• Face-to-face discussions

Be sure to document communication you have with your insurer, too. Get conversations in writing, note dates and times of discussions, and keep copies of anything you send to your provider. A good documentation policy is crucial for limiting your professional liabilities.

Other than your attorney, you shouldn’t allow anyone to look at the records related to your claim unless you’ve obtained approval from your claims representative.

The records should never be removed, copied, or altered in any way – including any clarifying remarks you may wish to add, no matter how helpful they may seem. If your case goes to trial, the altered records could damage your integrity. Even an accidental misrepresentation of evidence could affect your errors and omissions coverage.

Finding yourself in the middle of an E&O lawsuit can be unnerving, but it’s important to remain calm and follow your lawyer’s instructions. Litigation is tricky business and even a seemingly innocuous remark – if overheard by the wrong ear – can hurt your chances of winning your case.

Your lawyer will review the formal complaint and decide what your next move should be. If the claim seems unfounded, your lawyer may try to get the lawsuit dismissed on legal grounds. Your lawyer may also decide it’s best to:

Answer the claim. You will go to court, admit to or deny the allegations, and provide evidence for your defense, if necessary.

Attempt to dismiss the claim. If the plaintiff doesn’t have legal standing to file the lawsuit or presents a weak case, your lawyer can try to have the claim dismissed.

Settle the claim. Because the litigation process is very expensive, your insurer may recommend you reach a monetary settlement out of court with the plaintiff, as it may be cheaper than the alternative.

With some negotiation, you may be able to get the lawsuit dropped with a simple apology or a promise. In other cases, you can settle with an amount of money, which your E&O insurance can pay for. This method of conflict resolution is typically less expensive than going to trial.

Go to trial. If the plaintiff isn’t budging, you may have to prepare to go to court. But don’t worry – you and the plaintiff can still decide to settle at any time.

Be sure to understand what each option means, and if you have any questions about your insurance policy, don’t hesitate to talk to your insurance agent.

Mum’s the word. As with any lawsuit, you should never talk about your E&O claim with anyone – except your lawyer and claims representative, of course.

Never say you are sorry. You should never admit guilt without your lawyer’s consent. Even saying “I’m sorry” or “I apologize” to the plaintiff could be used against you in court.

Never make decisions without your lawyer. For example, you should never tell the plaintiff you’d like to settle without talking to your lawyer first. In fact, you shouldn’t talk (or write) to the plaintiff at all unless your lawyer is present.

Be honest and thorough with your counsel. There is no point in lying to your lawyer or your claims representative. It will only hurt you in the long run. In addition, you should strive to describe the details of the claim with the greatest precision and accuracy. For this reason, it’s a good idea to keep track of all client, customer, or patient communication – especially when you suspect they are unhappy.

Keep in mind that many errors and omissions lawsuits have nothing to do with your ability to do your job – despite what the plaintiff is claiming. Realize that this lawsuit is a learning experience and there are steps you can take to prevent similar lawsuits and a financial loss in the future.

Complete Insureon’s easy online application today to compare errors and omissions insurance quotes from top-rated U.S. providers. Once you find the right policy for your small business, you can begin coverage in less than 24 hours.