As you may know, business liability insurance covers losses related to bodily injury, property damage or advertising injury. But what happens, and who pays, when a printer neglects to catch a typographic error on a large order of engraved wedding invitations? Or when a plumbing repair fails and causes an entire office to be flooded?
Issues like these can be resolved with the purchase of errors and omissions (E&O) insurance. Errors and omissions insurance is a kind of specialized liability protection against losses not covered by traditional liability insurance. It protects you and your business from claims if a client sues for negligent acts, errors or omissions committed during business activities that result in a financial loss for the client.
Costly mistakes can happen – even to people with the best training and years of experience. It’s human nature. That’s why errors and omissions insurance is so important.
Who needs E&O insurance?
You need errors and omissions insurance if you’re in the business of providing a service to clients for a fee. At Nationwide, we cover printers and building-trades contractors, such as electricians, plumbers, HVAC installers and sheet metal workers.
Errors and omissions insurance policies usually cover the business owner, both salaried and hourly employees, and subcontractors working on behalf of the business.
Errors and omissions insurance is typically customized to meet specific needs of a business or industry. For example, a printer has different risks than an electrician does in a standard business day. Both have the need for liability insurance, yet each needs a completely different type of coverage.
What type should I buy?
Errors and omissions insurance policies vary from company to company, and are written to reflect inherent risks and common exposures particular to different types of businesses.
Some events resulting in a loss for a client may have occurred several years in the past, and the first time the mistake is apparent is when a court summons arrives in the mail. That’s when the retroactive date on the policy is very important. The farther back the retroactive date of the policy, the more coverage and protection it offers.
Even if claims are found to be unwarranted, legal fees and other related expenses can quickly eat up a company’s cash reserves in no time, causing a financial hardship. Most errors and omissions insurance policies cover judgments, attorney fees, court costs and settlements up to the limits of the policy.