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What is Errors & Omissions Insurance?
Clients hire California professionals for their expertise, and they expect professionals to apply that expertise correctly. Should someone hired make a mistake in their advice or other work, errors and omissions insurance might help cover any consequences.
Errors and omissions insurance is specialized commercial liability insurance. As is the case with most commercial liability policies, E&O policies commonly pay attorney fees, court costs and settlements associated with covered claims.
Who in California should carry an E&O Policy?
Errors and omissions policies generally cover California professionals who provide advice, such as:
- Attorneys, paralegals and other legal professionals
- Financial planners, investment advisors and other financial professionals
- Real estate brokers, brokers and others
- Insurance brokers, brokers and others
- Trustees (of most trust types)
Professionals who also apply a physical skill often need a different type of professional liability policy. For example, doctors usually purchase medical malpractice insurance instead of E&O.
What sorts of errors are covered by E&O Insurance?
The specific mistakes that E&O policies cover are determined by a policy’s language. Dependant upon terms and conditions, a given policy might cover incidents such as the following:
- Paralegal records a deadline incorrectly, and the practice therefore misses it
- Investment advisor commits a fat-finger error when buying or selling securities
- Real estate broker neglects to note that a property is classified as a historical landmark
- Insurance broker misreads a policy’s coverages, and provides poor advice as a result
There are still many other errors that E&O insurance might cover. An insurance broker who specializes in these policies can give specifically relevant examples of what a policy would likely cover.
Do professionals receive any E&O Insurance from their employer?
Most professionals who are employed do receive some E&O insurance through their employer’s policy. This coverage generally doesn’t extend to all situations though. In particular, it likely won’t cover:
- Personal consulting completed outside the scope of employment
- Pro bono work performed for charities or other organizations
Additionally, the coverage offered by an employer might not provide all of the protection that an employed professional desires. Employer coverage could have lower limits than what’s wanted, or its limit may be reached if multiple professionals file claims against the same employer policy.
Professionals who are paid as independent contractors are less likely to receive coverage from a hiring business.
What do claims made Errors & Omissions Policies cover?
Many errors and omissions policies are written so they provide “claims made” coverage. This normally means that coverage is partially determined by when a claim is filed, which is distinct from policies that base coverage on when an incident occurred.
How much are premiums for Errors & Omissions Policies?
Premiums for errors and omissions policies vary, as insurance companies consider everything from a professional’s location to their specialty. An independent insurance broker can help professionals find out exactly how much their needed coverages would be.