California Business Benefits

Errors and Omissions Insurance

 

Why Do You Need Errors and Omissions Insurance?

An errors and omissions claim can put your entire business at risk. Even if the person suing your business drops their lawsuit, you still may have to pay thousands of dollars in legal expenses. If their claim goes to court, your expenses, settlements and judgments can reach into the millions. Without errors and omissions insurance, these costs may have to come out of your business and personal assets.

 

 

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What Is Covered?

If your business faces a lawsuit related to the services you provide, errors and omissions insurance can help cover:

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Attorney fees, which can be $100 to $200 an hour for E&O insurance cases.1 In larger cities, some lawyers can charge up to $400 an hour. Because liability cases can last several months or even years, legal costs for small businesses can average $3,000 to $150,000.2 Even if a case doesn’t go to court, you may still have to pay an attorney an average of $5,000 to respond to the claim and provide legal counsel.

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Court costs that include reserving a room where the hearings will take place. If it’s a long case, your court costs can easily total thousands of dollars. You may also need to pay for expert witnesses to provide medical and technical evaluations.

 

Administrative costs for gathering documents, such as:

 

• Medical records

• Written testimonies

• Business contracts

• Employment records

• Invoices

• Business receipts

• Customer waivers

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You may have to pay court staff, like court reporters who transcribe what’s said, along with office managers, receptionists, legal assistants and court reporters to document this information.

 

Settlements and judgments that may be awarded to the person suing you if you lose the case. These costs can range from a thousands to millions of dollars. Without errors and omissions coverage, that can be enough to shut most business’ doors for good.

 

If someone makes a claim against your business, and you don’t have E&O coverage, you could have to pay these costs out of pocket. If you do have E&O insurance, you can rest easy knowing your policy helps cover most of these costs, even if temporary workers or contractors were the ones who made the mistake.

 

What Errors and Omissions Insurance Typically Does Not Cover

Errors and omissions insurance is a smart investment for your business, but it doesn’t cover everything. For instance, it won’t cover:

 

Illegal acts and purposeful wrongdoing if you intentionally break the law or deceive your customers. Let’s say a client hires your contracting business to update their kitchen. They ask you to use a certain type of wood, but you use cheaper imitation materials and still charge them full price. If the customer finds out and sues you, your E&O policy won’t cover it.

 

Patents, trade secrets and intellectual property taken without permission. If someone sues your business for stealing what belongs to them, your E&O insurance policy won’t cover your legal costs.

 

General liability claims that your business caused an injury or property damage. For example, if a customer hurts themselves in your office and files a lawsuit against you. To protect yourself from these claims, you’ll need a general liability insurance policy.

 

Employee claims for employment issues or work-related injuries and illnesses. If a current or former employee sues you for wrongful termination or harassment, employment practices liability insurance would help cover your legal costs. Workers’ compensation insurance gives your employees benefits to help them recover from work-related injuries or illnesses.