Errors & Omissions Insurance (E&O)
Error and Omissions Insurance (also known as E&O) is insurance any company in the service sector should have to help cover the instances where either your or your employees make mistakes.
This type of insurance is often an oversight for many new companies who may not realize its importance. E&O Insurance is designed to help insure against claims related directly to its name, “errors” and “omissions”. This covers a potentially wide range of issues, but specifically is meant to help your company cover potential damages as a result of errors or omissions that occur while performing contracted work.
Every business in the service sector is hired by a client to either perform some type of task, or to provide advice related to your field of expertise. For most companies, this works out well. However, humans can make mistakes. If a client believes your work was not done correctly (error) or an employee missed or forgot an important step in completing that contracted work (omission), your business could be liable for damages due to negligence or a perceived breach of contract.
Errors and Omissions Insurance is designed to help mitigate those costs. Many businesses believe that they are not at risk for lawsuits related to employee mistakes. However, any business that does contracted work can be sued for negligence. While some clients may choose not to pursue legal action in situations where errors or omissions have occurred, not every client will be forgiving. Some mistakes can be extremely costly for clients, who may then choose to pursue legal action to reimburse their costs. The bigger the contract, the more exposed your company could be to such legal consequences.
Do I Need Errors and Omissions Insurance?
Errors & Omissions Insurance may come in handy if:
- Your company provides physical or advising services
- You have employees who complete contracted work
- You are the sole proprietor and operator of a service company
- The services your business offers are complex
- Your business has a steady stream of clients
- You have clients that require you to purchase this type of insurance as part of the contract
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