It was probably a simple mistake. Everybody makes them. When a client alleges that a mistake you made cost them a lot of money, however, there is a problem. That’s where professional liability insurance comes into play. Specifically, errors and omissions policies, or E & O insurance, covers an alleged failure of contracted services to do what they were supposed to do, or an omission in those services, either of which caused financial loss to the client. This may lead to a lawsuit.
General Liability is not Enough
General Liability policies are important for most businesses, but they focus on injuries and harm caused by accidents. Injuries from a slip on a wet restaurant floor or a car accident involving a company vehicle are two examples. They do not cover specific services a broker offered a client that didn’t pan out and which caused financial, rather than physical damage. That’s why your insurance firm should give you an E & O insurance policy in the overall insurance package. For a larger firm, director’s insurance may also be a good idea if there is a risk that someone will target the board of directors after a financial loss.
How Insurance Pays off
These insurance policies pay off so you can keep working and stick to business, not getting stressed out about potential losses. A lawsuit can have multiple financial ramifications. These include the following:
- Attorney fees
- Court costs
- Damage judgments
If you have a good E & O insurance package, these costs will be covered up to a certain limit, as long as the service rendered was not illegal.