subject: Basic Facts About Errors Omission Insurance [print this page] Error omission insurance is a type of professional liability policy much like malpractice insurance. Professionals, particularly those with their own businesses or do not have liability insurance under an employer, should have this type of policy. Some may even get an extra policy if an employer provides one to be sure that the policy protects the individual professional and not just the business. This type of insurance is usually made on a claims-made basis rather than an occurrence form.
An E&O policy will help cover the costs of defense and damage awards that inevitably come with professional liability claim. Even if damages are not awarded, the cost of defense will still have to be paid, so having this kind of insurance is necessary. Most policies have a specific limit on what it will cover, but this limit depends upon the insurance provider and the kind of insurance needed. It is also important to know what kinds of claims are covered to be sure there is enough coverage.
An error omission insurance claim must prove negligence on the part of the provider that comes from either performing a job poorly or not performing a job at all. Many policies will not cover fraudulent, illegal or intentional activities. Most will not cover punitive damages. This is a separate policy from general liability insurance as well as property insurance, so it either may not cover many of the claims commonly found in these policies or it gives extra assurance depending on the needs of the policy holder.
There are many providers of E&O insurance. Many may specialize within certain areas such as appraisers, home inspectors, insurance agents, notaries and real estate agents in order to offer better service to clients. In any case, most professionals will recommend that the policy holder find the maximum amount of coverage because a lawsuit can be about anything. Furthermore, coverage may vary from state to state, so it is important to find out if the maximum amount of coverage is actually all encompassing. Before committing to a policy, one should read the fine print to understand when and how one is covered.
The cost of error omission insurance will also vary based on a number of factors but primarily on the merit of the policy holder. An underwriter will examine the claims history and other documents such as contracts in order to determine the risk involved in covering a potential client. Exposure to limited may be limited with comprehensive contracts. Also, it is best to purchase a policy before an incident, usually before the business or professional begins to provide a service to clients. This will ensure better rates as well as better coverage for the policy holder.
by: Bob Roberts
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