Who Needs Massachusetts Errors and Omissions Insurance

Errors and omissions insurance, or professional liability insurance, is vital to protect the interests of many individuals and businesses who provide professional services to clients.

A professional is someone who possesses special knowledge and skill in a certain area and uses that skill to provide advice and services to clients. Traditionally this definition applies to doctors, lawyers, architects, engineers and accountants. Today the definition of a professional or professional service has an increasingly expanding scope, and the need for errors and omissions insurance is becoming more important across a wide variety of industries.

Actuaries, real estate agents, insurance agents, appraisers, mortgage and securities brokers, business consultants and a variety of other types of professionals should consider errors and omissions insurance. In addition, certain businesses have E&O exposures, even if they are not considered “professional practices.” These include advertising agencies and PR firms, Internet service providers, IT firms, Web hosting companies, home inspection services, and many more.

Errors and omissions insurance covers professionals, their partners, their employees and the partnership or corporation for damages caused by providing or failing to provide professional services. For lawyers, accountants, real estate agents, actuaries, consulting firms and others, damage caused to the client is typically monetary loss as a direct result of the professional’s work. For physicians and certain other professionals, the scope of potential damages is more extensive.

Most E&O policies cover judgments, settlements and defense costs. Even if the claims are found to be false, defense costs alone can be financially devastating for individuals or firms of all sizes.

There is no standard policy language for E&O policies, and every type of professional or professional services firm has different types of exposures that need to be considered. You will need to work closely with your insurance agent to make sure your policy fits your needs.

E&O policies are typically written on a “claims made” or “claims made and reported” basis. This distinction means that claims must be made, or in some cases made and reported, within the policy period. These policies include a retroactive date to allow for damages that occurred before the policy was in force to be reported after the policy is in force—with claims occurring before the retroactive date not covered. How your policy handles claims that occur before the policy is in force is extremely important for you to understand.

Medical malpractice policies can often be purchased on an “occurrence” basis, which means that the act, error or omissions must occur during the policy period and the claim can be made anytime thereafter, even after the policy has been canceled. Again, the distinction and the particulars of your policy are very important.

Most E&O policies will have certain coverage exclusions, depending on the type of profession. Typical exclusions include:

  • Criminal, fraudulent or malicious acts,
  • Bodily injury and property damage (except in certain cases such as medical malpractice or for design professionals),
  • Workers’ compensation claims,
  • Punitive damages,
  • And more.

Again, the exclusions will vary based on your profession and your policy. Remember, E&O insurance is for liability claims directly related to the provision of professional services, and the resulting financial loss for a client or customer. Therefore, losses related to automobiles liability, general liability issues, property claims, workers’ compensation and so on are not covered by professional liability insurance. Those types of claims are covered by other business insurance policies.

Contact your Gallant Insurance agent today to learn more about E&O Insurance for you and your business. Professional liability is a complex issue that cannot be taken lightly. You need to understand where you have exposures, how to best mitigate those exposures, and how to protect yourself should someone make a claim against you.

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