As a business owner, you need adequate insurance protection to keep your company afloat in the face of legal action. Errors & omissions coverage protects your company in the case of mistakes or alleged errors.
Unfortunately, dissatisfied customers are a reality that every business has to deal with. If a client becomes dissatisfied, he or she may claim that you provided bad advice or hurt him or her financially with your decision-making. For example, if an accountant offers tax advice to a client but he or she does not receive the tax breaks he or she thought were promised, a lawsuit might ensue.
Missed deadlines can become an issue for law firms and insurance agencies. For example, if a lawyer misses a filing date and a case is dismissed because of negligence, the client could file a lawsuit. If there was certainty that the original case would have earned him or her an award, then the client might sue for that amount. E&O coverages pay for legal fees and settlements associated with mistakes.
When a client accuses you of negligence, you still may have to fight the allegations in court. Even if you did not act negligently or feel like the accusations are baseless, you are still responsible for legal fees. If a judgment is ordered against you, E&O coverage protects you.