Your customers trust you. That’s as it should be. So, why on earth would you need an insurance policy to cover you if you fail to perform your services correctly? We humans make mistakes and they can be costly. Even highly trained professionals can be the victims of accidental misjudgment. The costs associated with these unfortunate mistakes, however, need not destroy livelihoods.
What Is Errors & Omissions Insurance?
Errors and omissions policies, also referred to as Professional Indemnity Insurance or PII, are different from the coverage one gets with a General Commercial Liability policy and should be an integral part of your insurance umbrella. Commercial liability policies don’t cover errors, contract performance disputes or professional liability issues. If you are an accountant who fails to file a tax form in a timely way or a lawyer who discarded an old computer and found out too late that the hard drive fell into the hands of identity thieves, you need E and O insurance.
Doctors and lawyers have malpractice insurance to cover neglect of duty. They also indemnify themselves from accidental mistakes by buying professional liability insurance – errors and omissions policies. Such policies also provide protection from claims which stem from the errors and/or omissions of staff members. This will cover the secretary who misspeaks and divulges confidential information which in some way harms your client. It also covers other aspects of your operation, like improper disposal of the hard-drive in your copy machine which keeps a digital image of every document it ever scanned. (This information can be especially handy for the next company which leases the machine, particularly if they are in the business of selling juicy tidbits to the media.) These things could spell disaster. Of course, they might never happen to you. But can you afford the exposure?
Who Needs It and What Does It Pay For?
Who else needs professional indemnity insurance? The list is long, but professionals who are brokers, consultants, accounting and financial service providers should certainly look at PII. Construction professionals like general contractors, plumbers, electricians are also at risk and should consider the E and O option.
Errors and Omissions policies are generally used to pay for legal costs. (Even if you are not at fault, you’ll still need to defend yourself.) If somebody makes a claim against you saying that you were negligent in your advice or service to them and the court rules in favor of your client, you could be facing a lifetime of payments to the plaintiff. If you don’t have the money to pay a lawyer, everything you’ve ever worked for is at peril. If you lose a case for lack of proper defense, your reputation could be ruined forever. These are all unnecessary risks which can be easily avoided.
As usual, in matters of insurance policies and proper coverage, it is critical that you know and trust your insurance agent. He is your guide through the jungle of policy and underwriter options. His experience with PII and other necessary coverage can make the difference between success and failure in your business and your life. As you plan your career – or as your career changes over time, it’s important to stay in touch with your trusted agent. He or she can modify your policies as necessary to be sure you are always covered.
Professional indemnity insurance should be one of the primary pieces of insurance you use to protect your business and your other assets. This is one of those policies you should just assume you need. Consider it as basic safety equipment – like the seat belts in your car. But, just like those seat belts, they don’t work if you don’t have them.