Errors and Omissions Insurance - Common Scenarios

Errors & Omissions Insurance (E&O) is a useful policy that can protect you in case you make a mistake while delivering a service or product or fail to deliver on what you promised. Learn more about errors and omissions insurance.

In this article, we cover some common scenarios where Canadian businesses and professionals could benefit from E&O coverage.

Few Examples Where Errors & Omissions Insurance Can Protect You

You don’t have to stretch your imagination too far to picture a scenario where errors and omissions insurance comes in handy. Instead, you can check out real examples like those provided by ENCON Group Inc, a Canadian managing general agent.

Claims scenarios per practice:

Practice Claim Example
Doctors* ● Patient dies/requires life-saving surgery after a doctor fails to act on his complaints
Dentists* ● Dentist performs a sub-standard root canal
Chiropractors* ●  Patient sustains a serious injury during a neck manipulation
Physical therapists* ● Client claims physical therapist didn’t provide entire treatment
Lawyers ● Lawyer forgets to complete and file time-sensitive documents
Accountants ●  Client has to pay back taxes/interest due to their accountant’s error
Engineers ● Structural issues are found in a building due to an engineer’s oversight
Financial advisors ● Client loses a substantial amount of money due to bad investment advice

*Medical malpractice insurance policy

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Example 1) The Architectural Technician

e&o insurance claim example - architect

A new building was being constructed next to a strip mall. The engineering firm in charge hired an architectural technician so they could coordinate their core drilling. This architectural technician had errors and omissions insurance. In an unlucky turn of events, they drilled into a water main, rupturing the device and flooding the area.

The situation went from bad to worse when a nearby restaurant about to have its grand opening was flooded as well. The restaurant wanted $250,000 in compensation. They reached a settlement and the legal fees came to $20,000.

Example 2) The Insurance Broker

insurance broker

Here’s an example where you can think you’ve done everything right only to have a miscommunication land you in some hot water.

An insurance broker, who had errors & omissions insurance, provided a commercial insurance policy for a client. The client’s business had multiple properties, and the insurance covered all of them.

The policy offered a blanket coverage amount for all of the properties, but the client thought that financial coverage was for each property.

So when a fire shut the business down for four months, the business owner wasn’t too pleased with his insurance and sued the broker for misrepresentation. A settlement was negotiated and the legal fees came to $32,000.

Example 3) A Doctor, A Misdiagnosis, A Lawsuit

e&o claims example - physician

The family of the patient sued the doctor for $100,000 claiming that he hadn’t properly evaluated the patient or suitably treated him. When it was found that the doctor had done everything he was supposed to, the family dismissed the case, but in the end, the legal fees were $35,000.

As you can see from these examples, errors & omissions insurance doesn’t just cover you when you’re found responsible. It makes sure you aren’t financially ruined trying to prove you aren’t responsible, as well.

Accidents Don’t Have to Equal Financial Ruin with Errors & Omissions Insurance

Accidents happen, but they don’t need to mean the complete destruction of a business. Assessing your company’s risks and purchasing the necessary amount of errors and omissions insurance should be a priority for any company offering a professional service or advice.

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