Almost every professional can benefit from errors and omissions insurance, which is also called professional liability, professional indemnity or "E & O" insurance. This coverage will protect you from loss or damage arising from poor or misleading advice, or an act of negligence that leads to a client's financial loss. General liability policies provide coverage for damages from bodily injury or property damage, but leave coverage gaps when it comes financial losses.

There are many different types of errors and omissions policies and the wording is not standard from carrier to carrier. Also, this coverage is written on what is called a "claims-made basis," which is very different from other kinds of liability coverage. Because these can be complicated insurance policies to find, working with an Insurance Station agent can help you make the right choice.

Types of Policies Available

The list below provides an overview of the various professions for which errors and omissions coverage is available. Keep in mind that this is not a complete list, and we will be able to provide some guidance when you decide to purchase commercial insurance coverage:
• Professionals of all kinds in the health care field
• Architects and engineers
• Attorneys
• Insurance agents
• Realtors
• Accountants
• Stock brokers
• Financial planners
• Benefit plan administrators
• Trustees
• Appraisers
• Veterinarians
• Barbers and beauticians
• Morticians

Examples of Losses Resulting in E & O Claims

There are many potential causes of loss that can involve errors and omissions insurance. For example:
• A physician fails to make a critical diagnoses of illness due to lack of knowledge or a misinterpretation of symptoms.
• A realtor fails to give a client all the information on a property and later the client finds the property is not zoned for the intended purpose.
• A home inspector fails to make note of a mold infestation and a buyer ends up with an expensive problem to fix.
• An attorney misses a filing date and a case is lost.
• An accountant makes a mistake on a tax return, resulting in a financial penalty.
• A beautician uses the wrong product and leaves a customer with severely damaged hair.
• A stock broker fails to execute an order in a timely manner and a substantial loss results.
• A company website makes a particular statement or promise that is misleading or in some way causes a visitor to make a poor choice.

Any professional can make a mistake at any time. Errors and omissions insurance policy can provide a defense for you, even if a claim is groundless or fraudulent. We can help you gain full understanding of E & O insurance and whether you need to be protected from various exposures based on your specific line of work.

What Is a Claims Made Policy?

Errors and omissions policies are written on what is known as a "claims made" form. A standard general liability, by contrast, is known as an "occurrence" policy. A claims made policy will respond only for claims made while the policy is in force.

The reason for this difference in format is because the events leading up to an error or omission claim can be spread over a long period of time. It is not always possible to point to a given moment and say that is when the error or omission occurred.

Claims made policies have two unique features.

1.   An insurer writing a new claims made policy does not want to be responsible for claims arising from events prior to when the policy was established. Therefore the carrier will establish the effective date of its policy as the "retroactive date." Any claims arising from events prior to the retroactive date will not be covered, even if made while the policy is in force. Subsequent policy renewals without any lapse in coverage will retain the original retroactive date.

2.   The second unique feature is called the "discovery period." If coverage is terminated for any reason, future claims will not be covered even if they arise from events occurring while the policy was in force. Some companies provide a limited discovery period built into the policy, such as three or six months. If you are buying an E & O policy and you want a longer discovery period, you may be able to purchase one for an additional premium. Otherwise, you or your agent will have to go to a specialty market to obtain the coverage.

Important Notes on Errors and Omissions Insurance

When you are reviewing your professional liability risks and shopping for an errors and omissions policy, keep the following issues in mind:
• Errors and omissions policies are not standard.
• The options regarding retroactive dates and discovery periods can be critical to the long term viability of coverage.
• Professionals whose claim exposure can continue for many years after retirement should be especially sensitive to the availability of long discovery periods.