Professional liability insurance, also known as errors and omissions insurance, is necessary for those offering services, advice, or financial assistance. This policy protects against claims of negligence or error and is required for some professions, such as malpractice insurance for medical workers. Different jurisdictions have varying requirements, and coverage excludes willful or dishonest criminal acts. E&O claims cover a range of issues, and having this insurance can prevent devastating financial loss from civil litigation.
Anyone offering services, advice or financial assistance is at risk of being sued. Lawsuits can be filed when a client claims that she has received physical or personal injury, or financial, personal, or property loss as a result of a mistake made by a business professional. Professional liability insurance, also known as errors and omissions (E&O) insurance, or professional indemnity in the UK, is designed to protect an individual or business against claims of negligence or error.
An errors and omissions insurance policy is required for some professions. In the medical field, this type of policy is called malpractice insurance. Nations around the world generally require all medical and professional facilities to have malpractice coverage. This provides protection to the healthcare worker by providing legal assistance and claims coverage. It also protects the patient by ensuring that money will be available to pay a claim if they are injured in any way due to medical error or negligence.
Other professionals may also be required to carry errors and omissions insurance, depending on their jurisdictions. For example, some provinces in Canada, such as Ontario, Quebec, and Saskatchewan, require E&O coverage for estate planners and financial consultants. In the UK, professional indemnity is required for financial advisers, mortgage intermediaries and insurance brokers. In the United States, the requirements vary between states. Some insurance companies offer international policies to help companies that operate in multiple countries to comply with the insurance laws of each region.
Product or business liability insurance covers damage that may be caused by a product malfunction or by an accident that occurs on business property. However, these do not cover E&O claims, so a separate policy is required. Errors and omissions insurance policies may come with different deductible amounts that are agreed upon in advance. Some may include two deductibles; a maximum amount to be paid before insurance coverage begins, and the portion of the claim to be paid by the professional if found to be at fault.
Errors and omissions insurance coverage includes protection of a professional’s personal assets against claims. If a lawsuit is filed, the insurance company will provide attorneys and pay court costs associated with the lawsuit, even if the charge is frivolous. If the professional is found to be at fault, the insurance company will pay the settlement. This also includes protecting a company against civil litigation due to dishonesty by an employee.
While coverage exclusions may vary between jurisdictions, no errors and omissions insurance will cover willful or dishonest criminal acts. For example, if a professional who is the primary policyholder commits fraud, he or she will not be protected by the policy. However, if one of your employees is dishonest, his company is protected, but the employee is not. Willful damage to property, willful negligence, and claims against a person causing bodily harm or death to another person are also excluded from coverage.
The types of E&O claims that are filed cover a wide range of issues, such as loss of customer data, accidental infringement of intellectual property rights, or confusion regarding commissions. Professionals have also been sued because the advice a consultant gave turned out to be harmful, perhaps due to a lack of understanding of the client’s needs. Any professional offering a service, providing advice or promoting a product should consider having errors and omissions insurance to avoid the devastating financial loss that can be incurred through civil litigation.
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