Everyone makes mistakes, but when you make a mistake in your professional life, you could get sued if it results in damages for your client. Errors and omissions insurance, also known as professional liability insurance, can protect you from the consequences of making errors or omissions that affect your clients negatively.
But what exactly is errors and omissions insurance? Is it the same as medical malpractice insurance? What does it cover – and what doesn’
What Errors and Omissions Insurance Is
Errors and omissions insurance protects businesses and professionals against the legal consequences of oversights and errors, missed deadlines, failure to deliver services, breach of contract, professional negligence, or failure to meet professional standards of care.
Errors and omissions insurance covers legal fees, court costs, settlement costs, and other costs associated with a lawsuit resulting from a professional omission or mistake. It is a type of professional liability insurance.
In some professions, such as real estate, errors and omissions insurance is considered basically the same thing as professional liability insurance. However, it’s not quite the same as medical malpractice insurance.
What It Does and Doesn’t Cover
Errors and omissions insurance provides coverage for legal costs if you get sued due to a professional error, oversight, or mistake. If you get sued because you missed a deadline or didn’t deliver your product or service at all, resulting in damages for the client, errors and omissions insurance will cover the associated costs.
It can also cover you in the event that you fail to meet the standard of care outlined by your profession, if you breach a contract, or if you commit professional negligence. Attorney and court costs should be covered even if the claims are ultimately unfounded or even if you are found guilty in court.
However, errors and omissions insurance won’t cover everything; you should combine it with a business owners policy or general liability insurance for your company or practice. Costs associated with criminal prosecution or intentional fraud or wrongdoing are not covered.
Bodily injury that occurs on your premises or is inflicted by your company also usually isn’t covered under errors and omissions insurance – you’ll find that kind of coverage under your general liability policy.
Legal and other costs associated with employee injuries, cybercrime, or workplace harassment or discrimination claims also aren’t generally covered under errors and omissions insurance.
Employee injuries and illnesses should be covered under workers compensation insurance, while workplace harassment or discrimination claims should be covered under employment practices liability insurance.
Coverage for costs stemming from cybercrime would be covered under cyber liability insurance; however, to cover product failures, negligence, and other errors and omissions made by a technology professional, you can also buy a technology errors and omissions policy.
Who Needs Errors and Omissions Insurance?
Any company that provides services to customers should probably buy errors and omissions insurance. Professionals that should consider buying errors and omissions insurance include:
- Investment and financial advisors
- Insurance agents
- Maintenance professionals and contractors
- Wedding planners
Errors and omissions insurance costs an average of $500 to $1,000 per employee per year. Costs can vary, however, depending on what industry you’re in, your history of liability claims made against your company, the state in which you operate, how much coverage you require, and how many employees you have.
Regulatory bodies and state laws often require professionals to carry errors and omissions insurance, or at least to disclose to clients whether or not they have it. Even if your state laws or professional regulatory body doesn’t require you to carry errors and omissions insurance, you should consider buying it.
Without it, you’re on the hook for court costs, legal fees, and settlement payouts should you ever be sued for negligence, breach of contract, failure to uphold professional standards, or some other error or omission you might make in your professional life. And it’s really only a matter of time before you make an actionable mistake. We all make mistakes eventually.
Could you be vulnerable to being sued due to a professional mistake? Almost every professional is. If you’re in business for yourself, you need to buy errors and omissions insurance.
It will cover your attorneys fees, court costs, settlement costs, and other costs associated with a lawsuit should you ever get sued. Errors and omissions insurance could literally save your business.