We live in an extremely litigious era, and no matter how unintentional a mistake might have been, or how baseless a client’s claim might be, many people turn immediately to the courts and file law suits to seek some kind of compensation for damages real or perceived. This is where companies and individuals can turn to Errors and Omissions insurance for legal protection in these circumstances.
When a customer takes you to court over any errors or failure to complete the work that was stated in the contract, Errors and Omissions insurance can cover your costs. Contract performance disputes can be very detrimental to a company, but if you have a good insurance policy, you are much more likely to survive it.
This type of insurance can be applied to almost any business, but it is especially useful to a company in the services industry. When you offer a service for a fee, you don’t have as much tangible proof that the job was done correctly. That’s why customer will more often try to dispute those results and turn to litigation.
One can think of Errors and Omissions insurance as a policy that is very similar to malpractice insurance. The fact is that sometimes things go wrong in both the service industry and the medical industry no matter how hard you try to avoid problems. And when the client seeks compensation for the error, this kind of insurance can be a lifesaver.
Sometimes there are circumstances that are just out of your control. No matter how hard you try to finish the task as it was outlined in the contract, something can pop up and prevent it from happening. It could be the poor performance of a single employee or a horrible accident on the job. It may not have been your fault, but that doesn’t mean the customer won’t try to seek some kind of compensation.
There are many different Errors and Omissions insurance policies available, and you should make certain that you find the one that offers the coverage you need. Some policies may be overly complex, and others might not offer everything you need. Either way, be sure that you have the right policy, or you may find yourself in trouble.
A good policy will cover any judgment against you as well as any legal or court fees that you might incur. Even if the claim is totally baseless and the judge rules in your favor, the costs of lawyers and legal fees can do significant damage to a company, so be sure the policy covers both areas. You should also be sure that the policy will cover full time, W2 employees as well as 1099 subcontractors.
Many companies, however, don’t have sufficient Errors and Omissions insurance. After all, they haven’t been sued so far, so why bother? But all it takes is that one litigious client to make serious trouble and maybe even cost you your business. Get this insurance in place and you won’t have to worry about it.
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