Errors and omissions (E&O) insurance in Arizona
Arizona law doesn't require businesses to carry E&O insurance, but you might still need it to sign a contract or get licensed in your field. It provides crucial protection against lawsuits related to your work performance.
What is covered by errors and omissions insurance in Arizona?
Errors and omissions insurance helps pay for legal costs when your business is sued for professional negligence. That includes a wide range of claims, such as:
- Mistakes and oversights
- Breach of duty
- Late or incomplete work
- Misrepresentation
- Undelivered services
- Budget overruns
If a client files a lawsuit related to the quality of your work, errors and omissions insurance will cover attorney's fees, court costs, settlements, and judgments.
Depending on your profession, you might see this policy called E&O insurance, professional liability insurance, or malpractice insurance. Though the name varies, these policies all provide similar protection.
Though it's not mandated by law in Arizona, many professionals and small businesses still need to carry E&O insurance.
Who should purchase errors and omissions insurance in Arizona?
Businesses that provide professional services or advice should have E&O insurance, as their work could directly impact their clients' finances. Basically, if a mistake could cause your client to lose money, then you should invest in this coverage.
Errors and omissions insurance can also pay for frivolous lawsuits. For instance, an unhappy client could sue your business in an attempt to recover their losses, even if it wasn't your fault. These kinds of lawsuits can still end up costing a significant amount in legal defense costs.
Other circumstances outside of your control could lead to a lawsuit, such as losing a key member of your staff right before an important deadline. For these reasons and more, a wide range of professionals depend on E&O insurance for financial protection.
Here are the top industries that depend on this policy, along with some situations where they might need it:
Tech companies
Sole proprietors, startups, and corporations in the tech industry rely on E&O insurance to protect against lawsuits from dissatisfied clients.
Tech professionals often buy this coverage together with cyber insurance in a package called technology errors and omissions insurance, or tech E&O. This bundle helps pay for lawsuits related to data breaches and cyberattacks.
- A managed service provider (MSP) fails to patch a known vulnerability and a client’s network is compromised by ransomware.
- A cybersecurity consultant incorrectly configures firewalls, allowing a breach that impacts a customer’s operations.
- An IT staffing agency places a contractor who then fails to meet delivery requirements, triggering a contractual dispute.
Professional services
Businesses that provide professional services carry E&O insurance to cover financial losses in case a client isn't satisfied with their work.
- A consultant provides unintentionally poor advice that leads a small business to make a costly strategic error.
- A public speaker delivers a presentation with incorrect data, causing a client to lose investor funding.
- A recruiter misrepresents the details of a job in the posting that leads to unqualified candidates applying, delaying the hiring process.
Construction contractors
When a construction company makes a mistake, the results can be devastating. That's why E&O insurance is common in the construction industry. Here, you're more likely to see it called professional liability coverage.
- A plumber uses inferior fittings that corrode prematurely, causing water damage and forcing the homeowner to pay for repairs and cleanup.
- A masonry contractor miscalculates structural support requirements, resulting in cracking and costly rebuilds.
- A flooring installer lays the wrong type of hardwood throughout a residence, and the client has to replace it before moving in.
Is E&O insurance required by law in Arizona?
Though it's not mandated by law in Arizona, many professionals and small businesses still need to carry E&O insurance to sign contracts or to work in other states. Here are the fields that most often need this type of coverage—and examples of when they might need it.
Doctors and nurses
State laws sometimes require physicians to carry medical malpractice insurance. In Arizona, it's not mandated for physicians to carry E&O or medical malpractice insurance, but it's often a requirement for maintaining privileges.
Healthcare professionals often need this coverage in order to work at hospitals and other healthcare facilities, and to participate in health networks.
- An occupational therapist prescribes the wrong exercise plan, worsening a patient’s condition and causing additional therapy costs.
- A nurse mistakenly documents the wrong dosage schedule in a patient’s chart, leading to administration at the incorrect time and subsequent complications.
- An emergency medical services (EMS) worker fails to communicate a critical allergy during transfer, resulting in the patient having an adverse reaction.
Agents and brokers
Agents and brokers in both the insurance industry and the real estate industry rely on errors and omissions insurance, partly because their work can have a big impact on their clients' finances. States also sometimes mandate coverage, though it's not required in Arizona.
- A real estate agent overlooks a contingency deadline, causing their client to lose their earnest money deposit.
- An insurance broker misinterprets a policy endorsement, leaving a business without coverage for a loss they believed was included.
- A claims adjuster underestimates repair costs after reviewing outdated inspection photos, resulting in a dispute and legal action from the policyholder.
Attorneys
In Arizona, lawyers aren't required to carry malpractice coverage, however they must inform their clients if they don't have malpractice insurance.
Malpractice insurance is a crucial part of working for a law firm and proving that your business is reliable.
- A law firm miscalculates a statute of limitations and is barred from pursuing a client’s claim.
- A lawyer misses a crucial filing deadline, resulting in a client losing an important legal right.
- A firm administrator overlooks a court notice, resulting in sanctions or dismissal of a client’s case.
Top professions that need E&O insurance
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How much is E&O insurance in Arizona?
Errors and omissions insurance costs an average of $71 per month for small businesses in Arizona.
The cost of E&O insurance depends on:
- Type of business
- Your location, such as Phoenix, Scottsdale, or Tucson
- Business revenue
- Your policy limits and deductible
- Number of employees
- Claims history
Hear from customers like you who purchased E&O coverage.
How does errors and omissions insurance work in Arizona?
If you're sued in Arizona over a mistake in your professional work, errors and omissions insurance will pay for your legal defense costs. It's an affordable policy for many small businesses, especially those with low risks.
Keep in mind that E&O insurance is a claims-made policy, so it works differently from occurrence-based policies like general liability insurance. With E&O insurance, you must keep your policy active in order to file a claim. That's true even for incidents that happened while you had coverage, which is why you should think twice before you cancel your policy.
Errors and omissions insurance policies cover both legitimate and frivolous lawsuits. A legal battle can be expensive, between your attorney's hourly rate, administrative costs, and the resulting settlement or judgment. E&O insurance will cover all of these expenses, up to the limits on your policy.
When choosing your coverage limits, consider how much a lawsuit could set your business back financially. The deductible should be an amount you can easily afford, as you'll need to pay it before you can collect on a claim.
Are there any exclusions in errors and omissions insurance?
As with other policies, E&O coverage comes with exclusions that depend on your insurance company and the details of your policy. In general, E&O policies won't cover the following:
- Discrimination and abuse
- Criminal acts
- Lawsuits filed by your business
For instance, this policy won't help with legal fees if you decide to sue a client over a contract dispute or other issue. It'll only cover legal defense costs in the event of a lawsuit against your business.
Intentional harm, violations of laws and regulations, and services provided by subsidiaries or organizations not listed on your policy would also not be covered. Discrimination and abuse are typically covered by another policy called employment practices liability insurance (EPLI).
Does general liability insurance include E&O coverage?
A general liability insurance policy does not typically include errors and omissions coverage, though it's possible to buy these coverages together in some industries.
These two policies protect against different kinds of risks, which is why small business owners often carry both types of insurance coverage options.
- General liability insurance covers accidents that harm someone outside your business, such as a customer who slips in your office and suffers a concussion, or an incident where an employee drops and breaks a client's laptop. It also covers advertising injuries, such as copyright infringement, libel, and slander.
- Errors and omissions insurance pays for legal costs when your business is accused of a negligent act that harmed a client financially. In the case of medical malpractice insurance, this can extend to bodily injuries as well, as physical health is part of a healthcare provider's professional responsibilities.
General liability claims can happen at any business, especially those that are open to the public. E&O insurance is more specific to businesses that offer professional services or advice, especially in areas where a mistake could cause a client to lose money.
Read more about errors and omissions insurance vs. general liability insurance.
General liability insurance
Business owner’s policy (BOP)
Workers' compensation insurance
Cyber liability insurance
Commercial auto insurance
Both professional liability insurance and errors and omissions (E&O) insurance offer financial protection from client lawsuits over unsatisfactory work. They’re essentially the same types of coverage for mistakes in professional services.
How to get E&O insurance for Arizona businesses
TechInsurance is a trusted insurance expert for small businesses, with extensive knowledge of the IT sector. We help business owners find quotes from top-rated insurance providers, buy policies, and manage their coverage online.
Fill out TechInsurance's easy online application to compare free quotes for errors and omissions insurance and other policies from the leading carriers in the nation. Our insurance agents are available to help answer any questions you may have.
Once you find the right policies for your small business, you can begin coverage in less than 24 hours and get a certificate of insurance for your small business.
