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. Lear 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.
What Are a Few Examples of Situations Where Errors & Omissions (E&O) 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.
Quick scenarios per practice:
|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
Scenario One: The Architectural Technician
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.
Scenario Two: The 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.
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Scenario Three: A Doctor, A Misdiagnosis, A Lawsuit
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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