Why Your Clients Need E&O Insurance

Problem, Danger, Risk and Liability words on a speedometer 3d rendering

As an insurance agent or broker, you’ll find fresh evidence of the expanding nature of professional liability by glancing at almost any daily newspaper. People sue attorneys, accountants, engineers, architects, trust officers, insurance professionals, real estate agents, police officers and—last but certainly not least—hospitals, nursing homes, and all manner of physicians and health care professionals, seeking untold sums of money on the grounds that the defendant has breached some duty in the practice of his or her profession.

At one time, people didn’t sue attorneys, accountants, and other professionals very often and—when they did—they found it hard to win their cases. However, these days no lawyer, accountant, engineer, architect, trust officer, insurance professional, real estate agent. or health care professional would dream of doing business without professional liability coverage. The risks are just too great and it doesn’t matter how keenly the individual may feel that old sense of responsibility that is part of being a professional. The threat of litigation touches everyone who engages in commerce.

Errors and Omissions (E&O) Insurance

Errors and omissions (E&O) is the insurance that covers a professional services provider (or that person’s partners or firm) in the event that a client holds the provider responsible for services that did not have the expected or promised results. By not purchasing E&O, a company can be taking a serious financial risk. These types of losses are not covered under a general liability policy. (Note: For medical doctors, dentists, chiropractors, etc., this insurance is often called malpractice insurance. For lawyers, accountants, architects, or engineers, it may be called professional liability.)

Under an E&O policy, the insurance company will pay the insured’s legal for defending against liability actions taken by third parties and settlements or judgments (up to the stated limits of the policy).

A person or a company in the business of providing a service to clients for a fee needs E&O insurance, which is typically customized to meet specific needs of a business or industry. For example, a printer has different risks than an electrician does in a standard business day. Both have the need for liability insurance, yet each needs a completely different type of coverage. Clients must consider what will happen if a service is not done correctly or on time, and it costs your client money or harms their reputation. Even with the best employees and the best risk management practices in place, mistakes will be made. No one is perfect.

As an effective broker or agent, you can help your clients by identifying, analyzing, and quantifying the risks they face, and explaining the options in the clearest possible way. That being done, you can arrange am E&O policy with a bearable deductible and an intelligent limit—and assist your clients in controlling the risks that remain.

Want to know more about E&O insurance? Check out [add hyperlink to Advanced Thinking About E&O Insurance] our E&O insurance continuing education classes.

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