A photographer is sued for $3,000 for improper use of a photo.
An event planner books a venue for the wrong date and is sued for $25,000.
An HR consultant is sued $50,000 for an incomplete employee handbook.
What is an E&O liability policy and how not having it hurt your business?
The claims this article opened with fall into categories such as breach of contract, negligence, and dereliction of duty. These claims are known as economic claims and are specifically excluded from regular business liability policies because nobody has been physically injured nor any property damaged.
A Professional Liability policy, alternatively known as Errors and Omissions (E&O), covers these types of claims, and more.
How can that be, you’re thinking to yourself, isn’t Professional Liability insurance just for ‘traditional’ professionals like attorneys, accountants, doctors and engineers? Why should a photographer, event planner or management consultant carry it?
E&O liability policies have traditionally been reserved for professions like medicine, law, accounting and engineering. However, as claims increased for other service industries, carriers responded to this need with new coverage forms.
Wrongful Acts Trigger Coverage for E&O Policies
E&O liability policies usually will cover you for a ‘Wrongful Act’.
While definitions vary from policy to policy, a Wrongful Act is generally defined as any actual or alleged error, omission, or negligent act committed in the rendering of ‘Professional Services’.
Professional Services are defined as services in your stated profession (listed on the policy application) that your perform for a fee.
To put it very simply, if you charge a fee for advice or perform a service for a fee, you may be a candidate for a professional liability policy.
Prepayment of Legal Fees
One of the biggest benefits of carrying a professional liability policy is the defense coverage. Even if you’ve done nothing wrong, or someone is suing you just to retaliate, the policy will respond to provide defense coverage and make the claim go away.
Many times, the legal defense fees are the biggest component of the cost of a claim.
Having an E&O policy could almost be considered a pre-payment of legal defense fees.
How does a business owner know that they even may need E&O insurance?
Traditional ‘professionals’ like doctors, lawyers, accountants, even insurance agents, know they need E&O. But there’re hundreds of other types of businesses that need it and never know they could buy it until it’s too late.
Many people right here in the Hudson Valley have unknowingly put themselves, and their personal assets, at risk due to professional claims being excluded from a regular liability policy.
Don’t be left unprotected. When a claim happens, it’s too late to get coverage.
Have you unknowingly put your business and personal assets at risk?
Contact us today to learn how a professional liability policy can protect you.