For such a left-brain profession, it is surprising how many CPAs doubt the necessity for accountants professional liability insurance coverage. Yet any business that provides services or dispenses advice to clients needs specialized liability protection.
Add the fact that accounting firms work closely with sensitive financial data only intensifies the risk of claims, whether warranted or not. Remember, even a frivolous claim can be terrifically expensive to defend.
E&O the Way To Go
Errors and omissions insurance (E&O) is structured to provide coverage against claims of financial harm resulting from negligence (errors) and failure to adequately perform contracted duties (omissions). A business’s general liability policy does not provide protection from such claims. Depending on the terms and limits of the policy, accountants professional liability insurance generally pays for the following:
- Legal defense
- Court costs
- Awarded damages or negotiated settlements
What Is Covered; and What Is Not
Claims of misleading advertising and illegal or fraudulent activity are not covered by professional liability insurance. Below is a list of the more common exposures that are covered:
- Bad advice
- Misleading statements
- Poor performance
Don’t assume that your practice is immune from claims of errors and omission. Be sure to choose an insurance liability plan that is specific to the accounting profession.