Q: What do I need to know about E&O (Errors and Omissions) Insurance?
The most important thing to know is that it means what it says: if you erred or omitted something during a placement, there might be coverage. In other words, “ordinary, garden-variety, negligence.”
The problem is that you won’t be accused of negligence — at least not only that. You’ll absolutely be accused of breach of contract, or something intentional like gross negligence, breach of fiduciary duty, fraud, a variety of unfair business practices, and
None of these are covered under standard E&O policies. In fact, the only one that might be covered under a CGL (Comprehensive General Liability) policy is the breach of contract claim.
So assuming you can convince your E&O carrier that you are really being accused of negligence, you might be able to get coverage. The policies initially include a duty to defend you, then indemnify you (pay a settlement or judgment).
So if the claim is accepted, you’ll be assigned to a lawyer and receive a reservation of rights letter from the carrier. It says that the carrier “reserves the right” to charge you back for its legal expenses if at any time it decides you are liable for breach of contract, any intentional wrongdoing, or any act not deemed an “error” or “omission.”
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Should you get the coverage? I always say “Yes.”
But think about what you’re paying, that you’ll have a deductible to pay the carrier first, that you can’t choose your lawyer, that insurance defense lawyers don’t know our business, that there is great pressure on these lawyers to keep fees low, and that you’re on the hook for the consequences if things don’t go your way.
If you get even the hint of a claim, be ready to notify your carrier immediately. All of these policies have an awareness or notification clause, and if you don’t request coverage in writing within the time specified, you will not be covered.
To participate in future Q&As, email email@example.com. Keep in mind you should always consult with your own attorney. Nothing contained herein should be construed as legal advice. It is for your information only.