Errors and Omissions (E&O) Insurance Coverage

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Every business is vulnerable to mistakes while serving its customers. And when these mistakes occur, clients generally do not care as much about what might have caused them. They often primarily care about compensation for the damages incurred. Quite often, these compensations come when business owners have been sued and the court decides on what is needed.

E&O Coverage

When you run a small business, particularly one involved in providing professional services and advice, it’s not uncommon for a client to be dissatisfied with services or believe an error was made. If the client feels that your service was inadequately, unprofessionally, or incompletely executed (executed with errors and omissions), nothing stops him or her from filing for recompense. This doesn’t require that a service was completed incorrectly, but may in fact simply be something as simple as a client not being satisfied with the service provided.

Sometimes, you could offer professional advice to a client and things do not work as planned after the client executes your advice. Even that can cause the client to sue you. Business owners can never be too sure they will not be caught in such situations. To play safe, it is often advisable to go for an Errors and Omissions (E&O) insurance policy.

E&O insurance, also known as Professional Liability insurance, is a policy that protects the business should you be sued for negligence or errors in the service provided to a client that lead to losses. It covers several areas including lawyer fees, court costs, administrative costs, settlements and judgments.

When is E&O Insurance Applicable?

You may be wondering if E&O insurance suits your small business. Well, some businesses probably need it more than others. Businesses that offer professional services, in particular, often need this coverage, either by risk profile or sometimes contractually. E&O is also helpful for businesses that have a large number of employees providing guidance or advice to clients. Every employee is vulnerable to mistakes and every mistake can lead to a lawsuit from a disgruntled client.

As an example, assume your business acts as a marketing consultant to other businesses. In the course of providing advice in relation to a marketing campaign, you suggest that the client uses a particular phrase as their slogan printed on dozens of billboards. The client later calls to inform you that this slogan has caused their business significant reputational damage and financial losses as their target market finds it to be offensive. These are the kinds of delicate situations an E&O insurance policy will help your business through.

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