What an Errors and Omissions (E&O) Policy Does Not Cover

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Errors & Omissions Coverage

Before learning what any type of insurance does not cover, one must understand its definition and what kind of protection it offers. An Errors & Omissions insurance (E&O) policy is primarily meant for businesses within the professional services sector (or for those that offer professional advice) to protect the business when an employee makes a mistake.

There are a few primary categories of E&O claims: professional negligence, retroactive claims and subcontractor errors. The actual costs that are paid by the insurance company when a claim is approved often relate to judgments, legal defense and settlements.

An E&O policy would not provide coverage for a variety scenarios, such as intentional wrongdoing or harm, illegal activities, employee injuries or lawsuits, and business property damage.

Examples of Events Not Covered by E&O Insurance

  • Deceiving customers on purpose prevents you from being covered in the case of a claim. For example, a boutique that sells clothes by saying they pertain to a certain brand when in fact they are fake, would not be covered by an E&O policy.

  • Let’s say you sell very expensive vases. You pay someone to “accidentally” break a vase and then you file a claim to recover the money. A claim is denied if the company tries to scam the insurer or does anything else illegal.

  • If there is ice in front of your store and someone breaks his arm by slipping on it, E&O would not cover the suit; this type of situation falls under general liability coverage.

  • If an employee gets injured on the job, E&O won’t cover it. This falls within the scope of workers compensation insurance, which is mandatory in most states for businesses of a certain size. Still, it is a good idea to consider a workers compensation policy even if you are not required to do so by law in your state because you could otherwise be left unprotected.

  • If you were accused of having discriminated against a job candidate based on criteria such as gender or race, E&O would not cover any lawsuits that follow. To protect your business against such a case, employment practices liability insurance would be the appropriate coverage.

  • If a flood ruins the merchandise in your shop, there is no reason to file an E&O claim because it does not cover this sort of situation. You would want to have commercial property coverage, or a business owners policy, to protect your shop against damages due to fire, storms, and theft.

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