Errors and omissions (E&O) insurance in Michigan
Michigan law doesn't require all 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 Michigan?
Errors and omissions insurance helps pay for legal costs when your Michigan business is sued for professional negligence.
This 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 business insurance. Though the name varies, these policies all provide similar protection.
Though it's not mandated by law in Michigan for all businesses, many professionals and small businesses still need to carry E&O insurance.
Who should purchase errors and omissions insurance in Michigan?
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’s a list of the top industries that depend on this policy and how they benefit from the coverage:
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.
Examples of instances where technology professionals might benefit from E&O insurance include:
- An IT consultant recommends insecure software that leads to a data breach on a client's system.
- A cloud computing provider suffers an unexpected outage that suspends a client's ability to do business.
- A computer repair business in Detroit fails to fix a client's computer in time for them to complete an important project.
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.
Examples of instances where professional service providers might benefit from E&O insurance include:
- An event planner fails to book a venue they'd guaranteed for a client's wedding.
- A security guard overlooks a threat and someone vandalizes their client's property.
- A recruiter in Grand Rapids makes a typo in a job listing and candidates expect a higher salary and different benefits.
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.
Examples of instances where construction professionals might benefit from E&O insurance include:
- An electrician in Warren installs faulty wiring, which causes a fire that damages a client's home.
- A painter fails to complete a project on time and a store is forced to delay its grand opening.
- A general contractor doesn't comply with building codes, forcing the homeowner to complete a costly renovation on an outbuilding.
Is E&O insurance required by law in Michigan?
Though it's not mandated by law in Michigan for all businesses, 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 coverage, and examples of when they might need it.
Doctors and nurses
State laws sometimes require physicians, especially those with admitting privileges, to carry medical malpractice insurance. Michigan doctors are not legally required to carry malpractice insurance, but many elect to do so anyway.
Healthcare professionals in Michigan often need this coverage in order to work at hospitals and other healthcare facilities, and to participate in health networks.
Examples of instances where healthcare professionals might benefit from E&O insurance include:
- A registered nurse accidentally gives the wrong dose of medication to a patient, who suffers an adverse reaction.
- A home health aide misses an appointment and their client is alone when they suffer a medical crisis.
- A chiropractor in Sterling Heights makes an improper adjustment that worsens a client's back pain.
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 Michigan. Many firms and clients will require their agents to carry errors and omissions in order to work with them.
Examples of instances where agents and brokers might benefit from E&O insurance include:
- A real estate agent makes a mistake in an MLS listing, and the buyer discovers the property was smaller than advertised after they've finalized the purchase.
- An insurance agency in Ann Arbor fails to protect a client against risks they thought they were covered for, but they didn't find out until a flood swamped their property.
- A claims adjuster is sued for denying a valid claim because they accidentally looked at a neighboring property instead of the policyholder's home.
Attorneys
Malpractice insurance is a crucial part of working for a law firm and proving that your business is reliable. In Michigan, attorneys are not generally required to carry legal malpractice insurance.
Attorneys must inform the State Bar of Michigan if they don't have malpractice insurance. Additionally, attorneys acting as interim administrators must carry malpractice insurance.
Examples of instances where attorneys might benefit from E&O insurance include:
- A law firm in Lansing misses a deadline for submitting paperwork to the court on behalf of its client.
- An attorney fails to get consent from a client before making an important decision for them.
- A legal assistant misplaces a key document that was needed for a client's case.
Top professions that need E&O insurance
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How much is E&O insurance in Michigan?
Errors and omissions insurance costs an average of $66 per month for small businesses in Michigan.
The cost of E&O/professional liability insurance depends on:
- Type of business
- Your location
- 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 Michigan?
If you're sued in Michigan 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?
General liability insurance 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.
- 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 Michigan businesses
TechInsurance is a trusted insurance expert for small businesses, with extensive knowledge of the IT sector and beyond. We help Michigan business owners find quotes from top-rated 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, such as workers' comp, from the leading insurance agencies in the nation. Our insurance agents are available to help answer any questions you may have about your small business insurance needs and coverage options.
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.
