What is Errors & Omissions Insurance?
Professionals are hired for their expertise in a certain field, and they’re generally expected to apply the expertise correctly. Should a professional fail to apply their expertise correctly, they may be held responsible and sued. Errors & omissions insurance may provide Massachusetts professionals with financial protection should they face a covered lawsuit arising from an error.
Errors & omissions insurance is a specific application of commercial liability insurance. It’s intended to help professionals in a variety of fields with legal costs and settlements associated with covered error-related claims. Like most liability insurances, E&O insurance usually pays for covered legal costs even before a lawsuit is settled.
Who in Massachusetts Should Carry E&O Insurance?
Many professionals working in Massachusetts should consider carrying E&O insurance. While it’s not the only form of professional liability coverage, it’s a broadly useful one that any of the following professionals might want:
- Legal professionals (e.g. attorneys, paralegals)
- Financial professionals (e.g. investment advisors, financial planners)
- Real estate professionals (e.g. real estate agents, brokers)
- Insurance professionals (e.g. insurance agents, brokers)
- Trustees (of almost any trust)
Other professionals who primarily give clients advice might also be interested in E&O insurance
What Kinds of Errors Does E&O Insurance Cover?
The precise errors that an E&O policy covers are dependent upon the policy’s terms, conditions and exclusions. Depending on a policy’s particular language, it might cover situations such as the following:
- A real estate agent doesn’t note that a property is a historic landmark, and the client is unable to use the property as desired because of this designation
- A paralegal misses an important deadline, and the outcome of a client’s case is jeopardized as a result
- An investment advisor mis-executes a client’s trade, thus causing the client a substantial loss or missed gain
- An accountant mis-transcribes a number, and their client faces significant tax penalties and interest because of the mistake
These varied examples show how flexible the protections that E&O policies provide can be. For a more specific explanation of how a policy might afford protection in a given field, professionals should talk with a knowledgeable insurance agent. An agent who’s well-versed in these policies will be able to explain coverages and how they could apply in different scenarios.
Should Medical Professionals Have E&O Policies?
Medical professionals don’t necessarily only provide advice, but they also actively provide treatment. While E&O policies normally do protect against advice-based risks well, these policies typically aren’t designed to protect against risks associated with an applied skill.
If a medical provider makes a mistake in the treatment they render, E&O is unlikely to cover a resulting claim or lawsuit. Medical malpractice policies are often underwritten to cover errors in treatment along with mistaken advice. For this reason, medical providers generally should get a medical malpractice policy rather than a standard E&O policy.
Do Professionals Receive E&O Coverage Through Their Employers?
Professionals who are traditional employees usually do receive E&O coverage through their employer’s policy, but there can be notable restrictions. Employer-provided coverage
- Might not be as robust as employees would like
- Might run out if multiple professionals use it in the same policy year
- Probably doesn’t cover pro bono work or side work not done for the employer
Professionals who are independent contractors may or may not receive coverage from a hiring business, and any coverage that is provided could be limited in the aforementioned ways. Professionals in this situation can review their particulars with a knowledgeable insurance agent to determine how they can best obtain protection.