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Does Your Errors and Omissions Insurance Cover THAT?

Does Your Errors and Omissions Insurance Cover THAT?

Make sure your Errors and Omissions Insurance covers all the work you plan to do by asking your insurance agent these key questions.

Friday, January 10, 2014/Categories: errors-and-omissions

Errors and Omissions Insurance is a key business protection for most owners of technology companies. But no two Errors and Omissions policies are exactly alike, and choosing one with insufficient coverage can leave you on the hook for tens of thousands of dollars in lawsuit-related costs.

Questions to Ask Your Agent about Your Errors and Omissions Coverage

So how can you ensure that your company has adequate Errors and Omissions coverage? The process starts with a call to your insurance agent.

  1. Does my policy cover errors AND omissions? Be sure to read the fine print of your policy (or have your agent walk you through it). A policy with a lower premium may seem enticing, but often reduced premiums come at the cost of reduced coverage. Make sure that, if you decide to choose a cheaper policy, it doesn't exclude coverage for work you expect to do.
  2. What does my policy exclude? Policies that list exclusions specifically are often more comprehensive than those that list covered incidents specifically. Become familiar with the kinds of events and incidents that your Errors and Omissions Insurance does not cover and update your policy if you start to offer services that might expose you to those risks.
  3. What does "claims-made" mean for my coverage? Most E and O policies operate on a "claims-made" basis, meaning that they offer coverage only if the policy is in place both at the time of the incident and at the time of the claim. If those two criteria aren't met, you likely won't receive any benefits from your policy.
  4. Does my policy cover legal expenses? One major benefit of most Errors and Omissions policies is that they cover the legal costs (including lawyer's fees) associated with defending a business against a claim. You may find a less-expensive E and O policy that provides no legal defense coverage, but this is probably not a wise investment, as legal expenses can far exceed any damages for which you're found liable.
  5. But does it cover ALL of my legal expenses? To fully protect your business, make sure your defense coverage extends throughout the defense and appeals process. Otherwise, you could find yourself in the middle of court appeals with no legal representation - and no funds to pay for it.

Other Errors and Omissions Considerations

In addition to verifying the answers to the above questions, be sure to purchase an Errors and Omissions policy that has an adequate coverage limit. That is, make sure your coverage extends as high as you will likely need it to, based on the type of work you do.

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