What do an ice sculptor and a real estate agent have in common? Both may need insurance to protect against errors in their services, typically in the form of Errors & Omissions (E&O) coverage.
Standard commercial general liability insurance does not cover professional liability. So professions like doctors and attorneys carry malpractice insurance to protect against lawsuits.
Historically, insurance for traditional professionals (lawyers, doctors) was called Professional Liability (PL), while quasi-professionals had E&O policies. However, insurers now often use the terms interchangeably. Both PL and E&O policies cover financial losses incurred by third parties but exclude property damage and, often, bodily injury, with exceptions like medical malpractice insurance.
Who Needs Coverage?
Beyond doctors and lawyers, many professionals, including those offering advice or creating products, need liability protection. For example, an ice sculptor creating a swan for a wedding may face a lawsuit if a client deems the result unsatisfactory.
Defense Costs
E&O insurance is crucial for covering defense costs, which can bankrupt small businesses even if a claim is ultimately dismissed. In the medical field, defending against frivolous lawsuits can still cost $120,000 on average.
Tailored Coverage
Policies are typically customized for specific professions. For instance, real estate brokers may get coverage for failing to advise on environmental risks, while accountants may be covered for acting as trustees. Additionally, coverage may include things like inadvertent data corruption or transmission of viruses.
Lately, even more elaborately designed add-ons are appearing in E&O policies. For example, a London based specialty insurer recently announced it was launching a package coverage for U.S. manufacturers that combines errors and omissions coverage with cyber (including threat intelligence, security alerts, and risk management services), pollution (including liability at third-party sites resulting from the manufactured product), liability, media and advertising injury (including defamation and licensing breaches) and intellectual property protection against trademark and copyright infringement claims—all under one policy.
The coverage is designed to address potential gaps in coverage for losses that may not be fully addressed by a manufacturer’s general liability or product recall insurance policy, the company, CFC, said in a statement.
Claims-Made vs. Occurrence-Based Policies
Most PL and E&O policies are “claims-made,” meaning they only cover claims filed during the policy period. Some companies offer “occurrence-based” policies, which cover incidents that happen during the policy period, regardless of when a claim is filed. Special provisions may extend the claims period for retirees or those permanently disabled.
If you have questions about your business’s liability coverage, contact BPJ today.