Errors and Omissions Insurance
What Exactly Is Errors and Omissions Insurance?
Busting 4 Common Myths To Determine
If You Need E&O Insurance Or Not
Errors and omissions insurance, also known as E&O Insurance, is one form of professional liability insurance that protects the owner and employees against customers’ claims of negligent or damaging work.
In the world we live in today where “hot coffee lawsuits” are all too common, you should consider protecting yourself and your business from both legitimate and baseless lawsuits. An errors and omissions insurance policy protects you from any breach of duty, negligent act, error or omission regarding your professional services.
Here are a couple of examples that make it a little more clear why you may need E&O insurance policy:
Example #1: A tax preparation service made a mistake on a client’s tax return. The IRS assessed massive penalties and interest as a result, plus the client was audited, which consumed a lot of time as well as childcare costs. The client sued. Without E&O insurance, the tax preparer would have incurred costly legal fees as well as any damages if they lost. However, protected with a solid errors and omissions insurance policy, the court costs and damages were covered!
Example #2: A marketing agency was sued because the logo and branding they designed was “too similar to a competitor’s branding”. Although the agency owner got the client’s approval beforehand, they lacked documented proof. The agency was sued and actually won, but still paid significant legal fees as a result. With an E&O policy, those fees vanished! But if they didn’t have that policy, they would have been on the hook for pretty hefty attorney fees.
Example #1: Tax Preparation Service
A tax preparation service made a mistake on a client’s tax return. The IRS assessed massive penalties and interest as a result, plus the client was audited, which consumed a lot of time as well as childcare costs. The client sued. Without E&O insurance, the tax preparer would have incurred costly legal fees as well as any damages if they lost. However, protected with a solid errors and omissions insurance policy, the court costs and damages were covered!
A marketing agency was sued because the logo and branding they designed was “too similar to a competitor’s branding”. Although the agency owner got the client’s approval beforehand, they lacked documented proof. The agency was sued and actually won, but still paid significant legal fees as a result. With an E&O policy, those fees vanished! But if they didn’t have that policy, they would have been on the hook for pretty hefty attorney fees.
Example #2: Marketing Agency
Do You Need An Errors and Omissions Insurance Policy?
These 4 Myths May Reveal Your Answer
MYTH #1: My General Liability Policy Has Me Covered
While your general liability insurance policy does sufficiently cover accidents, property damage, bodily injury and lawsuits, it does not cover claims related to the services you provide. If your insurance agent told you that your liability coverage is sufficient, we would strongly encourage you to allow another agent to review your policy. We will be more than happy to do this for no cost or obligation.
It doesn’t matter. If you as a professional offer a service, it doesn’t matter if you have a 10,000 square foot office complex or work out of your kitchen while wearing pajamas. It also doesn’t matter if it’s just you or if you have a team of 500 employees.
Our team has reviewed countless policies, neither your homeowner’s policy nor your general liability policy will cover you for errors and omissions.
MYTH #2: I Work From Home OR I Am a Sole Proprietor Which Lowers My Risk
MYTH #3: I Don't Make Mistakes OR I Couldn't Be Sued For My Mistakes
This one always makes us laugh. First, even the most tightly run businesses still make mistakes. Plus, the more employees or contractors you have, the more mistakes you will make. Second, you’ll be surprised what people and other businesses are willing to sue over. A missed deadline = lawsuit. An incorrect calculation = lawsuit. Misrepresenting your company = lawsuit.
Here’s the real kicker: Oftentimes you don’t even have to make a mistake, error or omission to be sued. An upset client will FIND a reason to bring legal action. And an E&O policy protects you by covering those expensive legal fees.
We hope a licensed insurance agent never tells you this. While they may try to convince you that all errors and omissions insurance policies are the same so you won’t look elsewhere, it’s simply not true.
Just like every policy Compass Insurance Group provides, our E&O policies are created with your specific business and your specific needs in mind. That’s why we never start with a blind, online quote. We start with a conversation so we can get to know you, your business and your goals.
MYTH #4: All E&O Insurance Is The Same So I Just Need The Cheapest Policy
Let’s have that conversation. Call us at 615-987-0067 or contact us so we can ensure your business is properly covered. Then, we will work with you to find the coverage that’s right for you at the lowest possible price.