Jeff On Call: Errors and Omissions Insurance

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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
probably conspiracy.

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.

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To participate in future Q&As, email jeff@placementlaw.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.

More than thirty-five years ago, Jeffrey G. Allen, J.D., C.P.C. turned a decade of recruiting and human resources management into the legal specialty of placement law. Since 1975, Jeff has collected more placement fees, litigated more trade secrets cases, and assisted more placement practitioners than anyone else. From individuals to multinational corporations in every phase of staffing, his name is synonymous with competent legal representation. Jeff holds four certifications in placement and is the author of 24 popular books in the career field, including bestsellers How to Turn an Interview into a Job, The Complete Q&A Job Interview Book and the revolutionary Instant Interviews. As the world?s leading placement lawyer, Jeff?s experience includes: Thirty-five years of law practice specializing in representation of staffing businesses and practitioners; Author of ?The Allen Law?--the only placement information trade secrets law in the United States; Expert witness on employment and placement matters; Recruiter and staffing service office manager; Human resources manager for major employers; Certified Personnel Consultant, Certified Placement Counselor, Certified Employment Specialist and Certified Search Specialist designations; Cofounder of the national Certified Search Specialist program; Special Advisor to the American Employment Association; General Counsel to the California Association of Personnel Consultants (honorary lifetime membership conferred); Founder and Director of the National Placement Law Center; Recipient of the Staffing Industry Lifetime Achievement Award; Advisor to national, regional and state trade associations on legal, ethics and legislative matters; Author of The Placement Strategy Handbook, Placement Management, The National Placement Law Center Fee Collection Guide and The Best of Jeff Allen, published by Search Research Institute exclusively for the staffing industry; and Producer of the EMPLAW Audio Series on employment law matters. Email him at jeff@placementlaw.com.

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1 Comment on “Jeff On Call: Errors and Omissions Insurance

  1. Wow, Jeff:
    Selling E&O sounds like an even better gig than the guy in “Keeping the Fee” article has.

    While I realize advising we buy it is the prudent course…how would you react to the idea of small shops (who can presumably have more control over what they do)just doing without until/unless something happens and then calling an expert like you if there is an accusation?

    Thanks,Dave.

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