The ABC’s of E&O

Published on Mon, 11/25/2013 - 15:13

Does your business need errors and omissions, professional liability or malpractice insurance?

If you think the answer is “no,” think again. In the past, only doctors and attorneys had to worry about professional liability. But times have changed and in today’s litigious society, all kinds of professionals are sued. These types of coverages are no longer just for doctors, lawyers, architects, and accountants, but now cover diverse specialties such as geologists, teachers, web designers, and software engineers.

Unfortunately, many professionals leave their businesses dangerously vulnerable to costly lawsuits and find out too late that they needed coverage. To help you avoid this trap, here’s a quick primer on this coverage and why it’s so crucial to protect your bottom line.

What is the difference between professional liability, errors and omissions and malpractice insurance?

All three coverages defend you and pay any resulting damage up to the policy limits if your services or advice results in a lawsuit. However, errors and omissions coverage is specifically used when services have the potential to result in bodily injury or property damage. Professional liability coverage is specifically used when professional services have the potential to result in financial damage. And, if you work with patients or do work that involves the human body, malpractice insurance comes into play.

For example:

  • Errors and omissions insurance is often recommended for architects, engineers and contractors.
  • Professional liability is usually recommended for attorneys, financial planners, insurance agents, real estate agents and advertising professionals.
  • Malpractice insurance is used by doctors, dentists and spas.

How do you know if you need coverage?

If you can answer “yes” to any of the following questions, coverage is a smart idea:

  • Could a client become sick or injured, or die as a result of your mistake?
  • If your work fails to perform as expected, could there be resulting property damage and/or could people be injured?
  • Could your advice cause a client to lose money or make a bad decision?
  • Could your services result in libel, slander, copyright infringement, invasion of privacy or advertising injury?
  • Do you work with the human body?
  • Do some clients require professional liability insurance as a prerequisite for working with you?

Why is this coverage so crucial?

The primary reason to get this coverage comes down to simple dollars and cents – just do the math. If you get sued, even if you’re not at fault, defending yourself in court is a costly proposition. One professional liability claim can run up legal fees and settlement costs much greater than the combined limits of your existing insurance coverage, business assets, and personal net worth. It doesn’t take long to go through $100,000 in legal expenses. That can have a huge ripple effect on the bottom line of a large company. It can bankrupt a small company or professional practice like yours.

No matter what your specialty, the insurance experts at Heffernan Insurance Brokers can help you pinpoint your unique risks, and create a strategy to keep your reputation and your bottom line intact.