Can errors and omissions insurance policies help you?

February 26, 2014

Your small business may benefit from having errors and omissions insurance. Read on to find out how.

You’ve likely heard the phrase errors and omissions insurance or maybe just the term E&O insurance.  But do you know what it really is?  Is it different from professional or general liability insurance?  What does it cover?  And why should you be interested? Errors and omissions insurance is another name for professional liability insurance, which is also sometimes simply called PL.  If your small business is a consultancy, offers professional services of any kind, or regularly gives advice to clients, then you should investigate E&O.  It’s the coverage that protects you if clients aren’t satisfied with your work and decide to pursue legal action remediation – whether you made the mistake in question or not.

E&O coverage protects your business from mistakes you might make involving errors or negligence.  And it’s different in that it insures the services your business provides, rather than general risks like other types of small business insurance. There are several major benefits to having an E&O policy in place:

  • It protects you and your business from having to pay for legal defense costs and damages in the event of a covered lawsuit, subject to your deductible.
  • Errors and omissions policies will appoint an attorney to defend you in a lawsuit, even if you’ve made no mistakes.
  • It will pay defense costs, the judgments against you, and the associated court costs for covered claims, subject to your retention and your policy’s coverage limit.

While there are a few things an errors and omission police doesn’t cover, the policy can protect against many of the risks you face daily as a small business owner:

  • Alleged or actual negligence such as giving incorrect advice, an omission or simply failing to deliver.
  • Defense costs, including lawyer representation
  • Personal injury, meaning you’re protected against personal injury lawsuits for libel and slander if either is committed as a result of your professional services
  • Copyright infringement
  • Temporary staff and independent contractors if the claim is otherwise covered

Small business start-up exposures are many, but you don’t have to face them alone.  Contact us to discuss your situation with an agent who’s familiar with your industry, and get the E&O coverage you need in place – before you need it. The contents of this article and the linked materials do not offer legal, business, or insurance advice related to the needs of any specific individual business. Small business insurance underwritten by Hiscox Insurance Company, Inc., a Chicago based insurance company that is rate A (Excellent) by A.M. Best. License#: 0F09668. Coverage is subject to underwriting, terms, conditions, and limits of the policy, and is not available in all states. Claim scenarios are for illustrative purposes only and are subject to the terms and conditions of the policy in question. Please consult your professional advisor.