I’m currently working with several small business owners around the Dallas / Fort Worth area regarding their commercial insurance needs. One of the questions each of them have asked is what commercial insurance do they need to adequately protect themselves and their businesses. The answer is it just depends on the business. Some need general liability, others need business property coverage, and a couple need professional liability or errors and omissions (E&O) coverage.
Professional liability or E&O coverage is designed to protect a business or individual when a client holds them responsible for a service they provided, or failed to provide, or that didn’t meet the expected or promised results. In many cases, the business or individual is involved in providing a service or skill set to a client. For example, a chiropractor, doctor, or dentist will have malpractice insurance while an architect, accountant, engineer, or lawyer will have professional liability insurance.
Professional liability insurance, regardless of what it’s called, is designed to protect the individual or company when a mistake is made or when a client perceives one is made. E&O policies cover judgments, settlements, and defense costs even when a claim proves to be groundless. The amount of money a solopreneur or small business would spend to defend even a baseless lawsuit could cost tens of thousands of dollars, bankrupt them, or have a huge impact on the financial bottom line.
Most people within the previously mentioned professions (physicians, lawyers, architects, accountants, etc.) already know they need to have E&O insurance. There is, however, a large number of people and businesses in other professions that should also have professional liability insurance including:
- Technology Sector: Web designers, web hosting companies, software and database developers, network designers & installers, consultants, project management firms, etc.
- Personal Services: Career and life coaches, wedding planners, photographers, videographers, editors, caterers, event planners, etc.
- Business Services: Realtors, title companies, printers, consultants, tax preparers, logistics professionals, advertising and public relations agencies, freelance writers, etc.
Anyone who provides a service to a client for a fee should have E&O insurance. One of the chief reasons for having professional liability insurance is that it covers the type of losses or claims a general liability policy doesn’t cover.
Each of the professionals mentioned above have one thing in common regardless of how varied their services are; they all have some level of exposure. It is important then to find an E&O policy that is tailored to their unique exposure. Read the actual policy (not just the quote) before acquiring professional liability insurance to confirm it includes needed coverage without excluding any services the individual or companies provide.
It is also important to determine exactly what coverage the policy contains. For example, some E&O policies cover legal expenses, up to the policy limits, but not punitive damages.
The cost of E&O insurance varies widely due to a number of factors including type or class of business, location, claims history, and other variables. Even insurance companies that compete in the same service sector space will have different prices so compare several companies to find the best policy at a rate that fits the company’s budget.
Do you need professional liability insurance? Share why, or why not, as well as your questions, comments, and thoughts in the comments section of our blog or on our Facebook and Google + pages. I’d love to hear from you!