Omitting Error And Omissions Insurance Is A Business Error
Everyone makes mistakes. Businesses executives make mistakes, as do their staff. Some mistakes are big ones, while others are small. If the mistake is by a professional service firm, in the course of its service to a business client, the consequences of that mistake could be severe. Should the client suffer a financial or other setback the professional service firm could be sued by its client. This is where error omission insurance would step in and save the financial day.
As an example, Smith's Marketing Services might recommend to business client Joan's Carpet Cleaning that marketing by way of a YouTube video is a poor strategy, Where Joan's competitor Bob's Carpet Cleaners to subsequently place a video on YouTube that brought it new business, Joan might well believe that she got bad advice from Smith's Marketing Services. Joan could believe that Smith cost her business that went to Bob's company. Smith's error omission insurance carrier would be responsible for a settlement or litigated payout to Joan.
This type of professional liability insurance typically covers legal costs including attorney fees and expenses, and any settlement with or without a trial. It protects a business from not only the mistakes and omissions of its executives but of all its employees. It even covers errors on the part of contract workers who act on behalf of the insured firm.
Insurance coverage is recommended before a company even begins its first day of operation. Once a mistake has been made, it is far too late. Even charges later found baseless can generate attorney fees that are insurmountable for a struggling small business. Additionally, new and growing businesses often seek investors, business loans or collaboration with venture capitalists, angel investors, or other firms. All these interested parties would undoubtedly want proof that error omission insurance is in force.
While just about any business can benefit from this type of protection against liability, not all EO insurance carriers cover all business types in every industry. Some carriers specialize in covering insurance and real estate firms, for example, while others exclude them. Others specifically exclude medical care organizations and private investigators. Companies need to thoroughly investigate numerous firms to determine just the right insurance carrier for their needs.
When choosing a carrier cost is, of course, an issue. Other important considerations are the ceiling on the coverage or whether the carrier covers punitive damages. Signing with a bargain firm does not necessarily mean the company has found a true bargain. Finding an error omission insurance firm with expertise in the prospective client's industry, with coverage that exceeds any reasonable expectation of award and without exclusion for punitive damages might well be worth the extra dollars spent up front.
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