How does errors and omissions/professional liability insurance protect me?

This is a question we get asked a lot. Keep calm and carry on sign with toy cars

It’s a good one though, and worth taking some time to consider.

The typical answer is something along the lines of ‘claims of negligence against you by a disgruntled client’. You’ve probably come across a similar explanation already.

So exactly what are you protected against? Exactly how does it protect you? What do you get for your money?

The basics

So to answer these questions, and to paraphrase James Brown, we’ll need to break it down a little.

With errors and omissions insurance, you pay a premium an insurer who in turn agrees to pay claims for events covered by the policy.

For an example of errors and omissions, think of the ‘claim of negligence against you by a disgruntled client’ as a reason for having insurance

Yes, most paid claims do stem from actual mistakes. What surprises most of our clients though is how small a mistake can be to result in a payable claim. .

The insurer pays for the legal fees associated with your defence and any damages or awards paid to your client as a result of the claim – up to the level of indemnity provided by your policy. You don’t pay a thing (apart from the deductible, if applicable).

So in these terms, the protection you get is financial; the coverage is there to safeguard your business and its assets should the worst happen. Simple, but important. It’s your livelihood we’re talking about, after all.

Without insurance, even a baseless claim could wipe out your life’s work in a matter of weeks.

Levelling the playing field

But there’s also a less tangible, arguably more significant side to errors and omissions coverage.

Having the financial might of an insurer and their crack legal team behind you just tips the balance a little more in your favor. It’s a big arm around your shoulder when a potentially powerful client is pointing its finger at you. That’s meaningful, if not easily quantifiable, reassurance.
That’s the sort of constant, everyday protection you need. It’s comforting to know that if it does all go wrong, you’ve got an expert ally on your side prepared to back you up and do what’s in your best interests.

Keep calm and carry on

So, what does E&O protect you from? Think of it this way: E&O insurance doesn’t offer protection, it is protection.

Having it in place gives you the confidence to do what you do, and to do what you do best: running your business.

And that’s what really matters.

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