Errors and omissions insurance application

Errors and omissions insurance (also called E&O, professional liability insurance, or malpractice insurance) covers your legal expenses if a disgruntled customer sues you over your services. Whether your company was in the wrong or not, E&O covers the cost of litigation up to your policy limits.

To determine your business's risk of facing a lawsuit, your E&O application will ask for details about your company's organization, revenue and payroll data, information on how your company uses contracts, potential corporate entanglements, and insurance and legal history.

Throughout your E&O application, you'll be asked to provide details about your business. Be prepared to specify:

• Contact information for each of your company's locations
• How many employees you have and their status (full-time, part-time, etc.)
• The date the business started (under current ownership)
• A brief description of what your business does
• How your business is legally organized (sole proprietorship, LLC, S corporation, partnership, etc.)
• The type of work your business does

It will also be useful to have the following documents when filling out your application:

• Recent balance sheets and projections for the next fiscal year
• Form contracts and modified contracts you use with your largest clients
• Insurance policies or certificates of insurance for the coverage your business already carries
• Payroll sheets and documents detailing executive compensation
• Your business's ownership interests in other companies
• Documents legally registering your company as a corporation, LLC, etc.

There are a handful of other factors that will impact the cost of E&O for your business. Keep in mind the following when filling out your application:

Contractual promises can both create liability and lessen liability exposure. For example, if you use subcontractors, do your contracts require them to carry E&O insurance? How often do you use contracts or modify your written contracts with clients?

Corporate entanglements may cause you to face legal complications that increase your liability exposure. To determine how the complexity of your corporate landscape might affect your E&O risk, the application will ask if a member of your company owns 3% or more of one of your clients and if you or your company owns 51% or more of another business. If either of those describes your situation, you'll be asked to provide details regarding those relationships.

You'll need to report your insurance and claims history. Be prepared to answer certain business insurance-related questions, such as what other policies your company has carried in the past 12 months, whether or not you’ve carried E&O insurance before, and what claims were made under your previous or current policies. The more details you are able to provide, the more tailored your policy will be to meet your business’s needs.

When you obtain E&O coverage for your small business, you can request to receive a certificate of liability insurance. This one-page document outlines your E&O coverage details, such as contact information for you and the insurer, deductibles, policy limits, and a description of the scope of your coverage. It acts as proof of insurance for clients and other business partners who require you to carry E&O insurance.

Having a certificate of liability insurance might allow you to land contracts you otherwise couldn't. It also strengthens your clients' trust when you list them as certificate holders, which means they get updates if your coverage lapses or changes.