Providing services: errors and omissions insurance The importance of the correct Insurance for your professional practice If you are a business advertising and providing professional services, there is a level of accountability expected from a client, especially in cases where the services provided, or your personnel providing those services, require specific designations. When clientele places its trust in your expertise, you are expected to deliver on that promise; however, as with any professional service, there is a degree of risk associated with providing those services. This is especially true with design and consulting services where the risk profile greatly increases as the consultant recommendations have the potential to significantly affect a construction project – and any missteps have greater risk of resulting in financial loss for a third party. This is where errors and omissions insurance comes in. Commercial General Liability (CGL) and Errors & Omissions (E&O) A company may assume that if it has General Liability (GL) Insurance, it is covered. Commercial general liability insurance is designed to protect you and your business from a loss if you’re found
legally liable for bodily injuries or property damage to a third party, caused by the product you sell or the service you provide; however, if you are providing professional design or cost consultation services, General Liability coverage is likely not adequate. GL policies generally contain an exclusion for any loss arising out of professional services rendered, something that is often overlooked when considering professional insurance requirements. Errors and omissions insurance (E&O) otherwise known as professional liability insurance protects companies, their workers, and other professionals against claims of inadequate work or negligent actions. Traditionally, E&O is associated with financial loss of a third party. For example, with design/construction claims, if something goes wrong on a project, all involved parties can be named, even if they did not contribute to the loss event. Kate Della Mora, a National Specialties Growth Leader with Marsh Canada Limited, based in Toronto, outlines the importance of remembering what E&O can do for these situations. “Typically, insurers have in-house specialized claims professionals, as well as lawyers
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on retainer with which they have good relationships. E&O gives your company more power in a situation where it is named in a suit, regardless of fault or liability. The Insurers’ personnel and connections have negotiating power to handle the claim in a quick, concise, and cost-effective way. If you do not have E&O insurance, you are left to your own devices and it can be a lot to navigate in terms of finances, time, and resources. E&O gives your company more power in a situation where it is named in a suit, regardless of fault.” Stepping back, E&O protects not just your company as an entity, but past and present employees within the company. It assures liability and accountability as a company that is guaranteeing a certain quality of service. It can also cover a company not just for errors, but for events such as missed deadlines, essentially anything that can alter a provided budget or the bottom line of a project, or that results in a financial burden to a company. A caveat to the above is contractual obligations or warranties/guarantees are not covered by E&O insurance, as these are considered “business risks,” and there is a moral hazard related to insuring To return to Table of Contents CLICK HERE
