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E&O Disclaimers: Do They Hold Up in Court?

E&O Disclaimers: Do They Hold Up in Court?

Errors & Omissions disclaimers may help IT firms reduce their risks, but they can't be counted on as a failsafe risk management tool. E&O disclaimers are most effective when written by a lawyer and accompanied by liability insurance.

Thursday, January 9, 2014/Categories: business-liability-insurance

Theoretically, an E&O disclaimer can prevent you from being sued for mistakes or professional negligence.

A web company might post a disclaimer saying it is not responsible for any its site, which says the content of the site "is not intended to be a substitute for professional medical advice, diagnosis, or treatment."

But these disclaimers can be used by any company in any situation. A system network admin could include a disclaimer that they are not responsible for data breaches that happen on their network. The real question is: will a disclaimer protect you from an Errors and Omissions lawsuit?

Gray Areas: How Much do Disclaimers Really Protect You?

Marketing TechBlog offers some advice to avoid lawsuits over online content, including using this basic disclaimer:

All data and information provided on this site is for informational purposes only. [Name of company] makes no representations as to accuracy, completeness, currentness, suitability, or validity of any information on this site & will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.

While this disclaimer is a start, if you want to include an E&O disclaimer to help mitigate your risk of lawsuits, you should have a lawyer craft one specifically for your business and the situation you'll be using it for.

These disclaimers may be able to protect you from an E&O lawsuit, but they don't always. Even if you clearly state that you are not responsible for errors and omissions, a judge could find you liable.

Furthermore, while E&O disclaimers can protect you from being held liable in a lawsuit (i.e., from being “found guilty” of legal liability for a mistake or omission), you could still be sued and have to defend yourself in court. Even when you win, lawsuits can cost a lot of money; in fact, even lawsuits that are eventually dropped can be expensive, as you still have to pay a lawyer to process and defend against the initial charges.

Recently, Microsoft was sued for essentially "hiding" a disclaimer by posting it on a page few users would see. Even though Microsoft had a disclaimer, the customer claimed it wasn't in a user-friendly location. While the lawsuit may seem silly, the reality is that it cost Microsoft thousands of dollars in legal fees.

The Bottom Line: Have E & O Disclaimers, But Don't Rely on Them

It would be nice if IT businesses could post a disclaimer and never have to worry about professional liability lawsuits. Unfortunately, that's just not how the world works.

Small businesses need Errors and Omissions Insurance to shield them from the cost of lawsuits over professional mistakes. To get an estimate on the cost of an E&O policy, use our Insurance Toolkit. Enter a few bits of information about the size of your company, and we'll calculate a rough estimate for what you can expect an E and O policy to cost. 

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