The term “e & o insurance” is an abbreviation for “Errors and Omission” insurance. Other common terms for these policies are “Professional Liability”, “professional liability insurance,” and “malpractice insurance.” No matter what vernacular is applied, this coverage provides essential loss protection against financial liability for third-party damage claims.
Errors and Omission coverage applies exclusively to acts committed in connection with one’s professional duties or business activities. Typical e & o insurance policyholders are real estate brokers or agents, attorneys, insurance brokers or agents, and architects. In such professions, it is relatively easy for real or perceived errors to be made to the detriment of another.
Any business or professional might make mistakes or oversights that result in physical or financial injury to clients or patients. Accordingly, all such professionals should have e & o insurance. This type of coverage is not included in ordinary liability or property insurance policies; it must be purchased separately. In essence, it guards against have to absorb any third-party damage claims that may arise in connection with a business or professional practice.
In today’s litigious society, damage claims are larger and occur more frequently than ever. Accordingly, e & o insurance policies vary considerably in specific exclusions and types of coverage provided. In general, however, all e & o insurance is designed to cover legal defense costs and damage awards that arise from third-party professional liability suits.
No matter how conscientious or careful a practitioner or professional is in his or her customary duties, damage claims are an ever-present reality. A business or practice can even incur liability through the negligent acts of other parties. This is known as “vicarious” liability.
Legal fees to defend against damage claims can be substantial. A major benefit of e & o insurance is coverage of such costs. Even when claims are ultimately dismissed or found to be meritless, professionals can incur many thousands of dollars for legal defense costs.
Like auto liability insurance, e & o insurance polices have specific coverage limits. These limits typically encompass legal defense fees and court-ordered awards or negotiated settlements. Only negligent acts are covered. Fraudulent, deliberate, or illegal actions are excluded. Most policies also exclude punitive damage awards. Review the terms of any proposed policy before signing. If you are unsure or hesitant about any aspect of the contract, do not hesitate to ask your agent or attorney about it.
By assuming a specific portion of the economic risks of potential damage claims, e & o insurance policies allow firms and professionals to plan ahead. Businesspeople or professional practitioners should purchase e & o insurance from an agency that specializes in this type of coverage. These insurance specialists have the knowledge and skill needed to assess the best coverage for you.