Mistakes, errors, accusations of negligent acts. Such things can lead to a costly lawsuit that could cripple your small or independent business and destroy your professional reputation. So, what can you do to protect yourself from that risk?

 Enter errors and omissions (E&O) insurance, also called professional liability insurance, which protects businesses against claims of mistakes, negligence, failing to deliver a service as promised, missing deadlines, inaccuracies, or misrepresentation. A small business, independent consultant, or contractor should have an E&O insurance policy if you are paid for providing services or advice to customers, as it provides you with financial support if you are sued. Without it, you’re potentially rolling the dice and tip-toeing your way through the liability risks you face.

 The fact is any professional can be sued for negligence or making an error that results in one of your customers suffering a financial loss, including doctors, lawyers, or architects.

Business Errors

How Does E&O Insurance Compare to D&O Insurance?

For all that an E&O policy does cover, it may not cover all possible claims you could face. For instance, it may be necessary to include directors and officers (D&O) insurance in your overall policy to fill in the gaps. Think of it this way: E&O insurance protects a small business and its employees who directly provide goods and services to customers. D&O insurance, meanwhile, is designed to cover the company’s management team from claims such as investment decisions, employment-related lawsuits, or unfair business practices. Talk to a licensed broker about your small business and the possible liabilities you face to determine if adding D&O coverage to your policy makes sense. 

Of note, E&O policies don’t cover damages resulting from cybersecurity breaches. If you store your customer’s electronic data, whether personal or financial, it’s wise to ensure that your policy includes coverage for cyber liability insurance. If your customers’ data is compromised or stolen, you can be held liable for third-party damages caused by a cyber-attack on your computing servers.

 

Is E&O Insurance Necessary for All Professionals?

Determining if you need E&O protection comes down to what you do. In short, if you make a living off your expertise or if your business provides professional advice or services, it’s recommended you add this type of policy to your coverage. 

Even the most cautious, meticulous professional can make a mistake or be accused of a breach of contract. In other words, no professional is immune to a lawsuit merely by being careful. Suppose you are sued, but the court decides the allegations against you are frivolous and dismisses it, you’re still on the hook to pay for your legal defence, and that expense can be significant. 

If you’re going to err, err on the side of caution and fill out an online application for E&O coverage. Our licensed brokers will get to work finding you the most suitable policy at the lowest annual premium available.

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