Commercial E&O Insurance (Errors & Omissions)
E&O Insurance: Who needs it and why
E&O insurance is one of the fastest growing additions to commercial insurance portfolios today. Due to the sharp rise in personal litigation, a societal trend that is undisputable, E&O insurance has become a popular and common choice for many business owners.
Who needs E & O insurance?
The short answer is, any business with clients, especially when contracting for services or delivery of a product. This includes business done in brick and mortar storefronts, at home or via the Internet.
The most commonly known individuals to hold E&O insurance are accountants, engineers, medical practitioners, real estate agents, etc. However, less obvious industries where it is common to find businesses carrying E&O insurance include advertising, event planning, Web hosting, media and the list goes on.
Why is E&O necessary in today’s world?
The bottom line is this: If you are in the business of providing a service or delivering a product to your client for a fee, you have an E&O exposure. To best understand why, simply put yourself in your client’s shoes. Would losing a significant amount of money due to mistake on the part of a client who contracted to provide a certain product or service to you be acceptable?
Everyone makes mistakes. E&O insurance guards against them. Here’s an example:
As an Internet-based bookseller, your client’s sole connection to his customer is through his computer. As a software consultant, you have contracted to research and install a program that would streamline your client’s online purchasing procedure. Unfortunately, the software you chose and installed not only crashed your client’s computer, it took a week to repair and resulted in the loss of sales that had been recorded but not yet fulfilled, as well as potential sales during the week his computer was not operational. Twenty thousand dollars later, plus attorney fees, you are found liable. He knows exactly what he made last year during the same period – he has the books. He has the contract. Now, he has a check from you for $20,000.
For a few hundred dollars a year, or even less, E&O coverage fixes those mistakes.