The Best Way to Protect Yourself from Customer Complaints

Are you so busy adding new clients and serving existing ones that you never learned about the ways E&O insurance can benefit your business? We thought so. But don’t worry. It’s never too late to protect yourself with high-quality and affordable E&O insurance.

Now, we understand that for some financial professionals, this is a counter-intuitive statement. That’s because they believe their risk of getting sued is quite small. Plus, they also assume if they do get sued, they’ll be able to resolve the matter amicably by making a financial settlement with their aggrieved client. We’re here to tell you those two assumptions are false, and that believing in them can potentially destroy your business.

First, every year, tens of thousands of financial-services clients sue their advisors.  Many times the advisors deserved to get sued because they made a serious mistake. Of course, a significant percentage of lawsuits fall into the nuisance category. They come from individuals with unrealistic expectations of how financial products work or who are looking to score a quick payday at their advisor’s expense. Therefore, even though your risk of getting sued is quite low, you can still get sued. And if you do and have no E&O insurance in force, your business will be in jeopardy.

Second, financial advisors clearly are talented and know a lot about their products, financial markets, and the needs of their customers. But what they may not understand are the nuances of human nature; they may not fully grasp the depth of a client’s anger over a real or imagined problem. And angry clients are prone to hauling their advisors into court—and unlikely to settle without a large cash incentive.

How to best protect yourself against customer complaints?

Start by having a process in place for responding to customer complaints. Your insurance FMO or securities broker-dealer likely has a procedure to follow. Familiarize yourself with this process and adhere to it carefully once a client’s intentions become known.

If your FMO or BD lacks such procedures, then develop your own. Key elements should include:

  • Ceasing communications with the client until you find an attorney to speak on your behalf. If you have E&O insurance, your insurance company will provide you with a capable lawyer at no cost to you.
  • Collecting all relevant documents pertaining to the matter under dispute.
  • Developing a written account of the conflict, based on input from all individuals in your firm who dealt with the client.
  • Not mentioning you have E&O insurance.
  • Not offering money to make the problem go away.
  • Filing a notice of claim with your E&O insurance company. If you don’t have an E&O insurer, then you’ll have to find and pay for your own attorney.

However, complaint prevention will always be the most powerful protection technique for your business. Do this by:

  • Always being properly licensed for every product you sell.
  • Knowing the features and benefits of your offerings in great detail and sharing this expertise with your customers during the sales process.
  • Setting proper expectations with clients regarding product results during various market conditions.
  • Having a strong on-boarding process so clients have realistic notions of the services you provide after the sale.
  • Having multiple methods available for clients to contact you, especially during times of market volatility.
  • Being perceptive to changes in client behavior resulting from a perceived error or omission on your part.
  • Responding quickly to signs of client discontent to make sure you understand what went wrong and to quickly make things right.

By adopting these measures, you will effectively mitigate your risks of getting sued. But the best protective strategy of all is to have a high-quality E&O insurance policy in force.

What is E&O Insurance and How Can It Benefit Your Business?

E&O insurance is similar to many other forms of insurance. It protects you against the negative impact of a financial loss. In this case, it provides money to pay for an attorney as well as to make good on any legal judgment against you should you lose your case in court. E&O policies have ancillary benefits that make them even more advantageous to financial professionals. However, these two core features of cash to pay for legal advice and money to discharge a legal judgment are the most important benefits of E&O insurance.

The benefits of having E&O protection are plain to see:

  • With E&O insurance in force, you eliminate financial uncertainty from your business and your life. When you buy a policy, you essentially trade a large, unknown financial risk—the chance of getting sued and the resulting cash payments—with a predictable recurring expense (your E&O insurance premium). Most financial professionals agree that replacing a large unknown risk with a fixed, ongoing expense makes a lot of sense.
  • You also get help managing the process of resolving a legal dispute—from an insurer-provided attorney and claims adjuster. Without the help of these two individuals, you would have to manage the process entirely by yourself, which makes it hard to keep working in and on your business.
  • Eliminating uncertainty and getting help during a crisis greatly reduces the stress and worry of dealing with unhappy clients. Why manage such situations by yourself when you can call on your E&O insurer for assistance?
  • Finally and most importantly, the key benefit of having E&O insurance is that a large legal judgment won’t put you out of business. As long as you have sufficient limits in your policy, your E&O insurer will pay for any legal judgments, damages, and court costs resulting from your loss in court.

Errors & Omissions Insurance is Designed to Protect Your Bottom Line

At the end of the day, errors & omissions insurance is designed to protect your bottom line. It makes sure your business can continue operating during a legal crisis—bringing in new clients and revenue—rather than scaling or shutting down. If you need income from your business to pay for current expenses and to help you save for the future, then self-insuring against E&O claims is a risky strategy, indeed.

In summary, your bottom line is what’s at stake. If you take proper steps to protect it now with E&O insurance, you will be ready for any future contingency. Doesn’t it make sense to not only grow your firm’s financial resources when times are good, but also to protect them against potential external attacks? Of course, it does!

If you already have E&O insurance, take a look at your policy now to make sure it still meets your needs. If it doesn’t, take steps now to secure coverage from a reputable E&O insurer. To speed the process of getting insured, consider selecting an online provider such as Using our user friendly website, you will be able to shop, apply, and pay for your policy, as well as print out your proof of insurance, in just a few minutes. What are you waiting for?

What a Policy of Errors & Omissions Can Do for You

As with all forms of insurance, E&O insurance can be hard to understand. And that’s under the best of circumstances when a business owner has plenty of time to learn about this essential coverage. So what do so many business misunderstand about E&O insurance?

For one thing, they assume it’s a “nice-to-have” type of insurance, assuming there are discretionary funds available. But since many solo financial professionals or those who run boutique operations only have slim margins over expenses, E&O insurance is viewed as a luxury. However, protecting yourself against E&O claims can literally spell the difference between your business surviving a major lawsuit and crumbling in the face of an insurmountable judgment.

For another thing, businesses view client lawsuits as something that happens to other firms. You know, to the ones that never established a desired client profile or that skimped on customer service in order to maximize profits. Not true. E&O claims happen even to firms that add new clients with care or who invest heavily in customer service. That’s because no matter how capable they are at customer service, employees are human and prone to making mistakes.

Finally, financial professionals assume that clients are more likely to bring suit against larger firms, viewing them as having more resources with which to settle a lawsuit. Again, this is a misperception. In fact, according to a study conducted by the U.S. Chamber Institute for Legal Reform, small firms shouldered the vast majority of tort liability costs ($105.4 billion in 2008), even though they represented only 22 percent of all business revenue. Presumably, large firms with extensive legal support are better equipped at making frivolous lawsuits “go away.”

Here’s our point: If you’re serious about succeeding in business, don’t fall prey to common misunderstandings about E&O insurance. Accept that it’s a crucial form of insurance protection, which nearly every small business needs in today’s litigious environment.

Do you understand what a policy of errors & omissions can do for you? If not, read on.

Boiled down to its core essence, E&O insurance makes your firm whole in the event it loses a client lawsuit and a judge hands down a large legal judgment against you. In this event, E&O insurance provides funds to retain an attorney to defend you and to indemnify the plaintiff should you lose in court.  It also pays for court costs as well as the expense of retaining an expert witness to testify on your behalf. But the essential features of cash to pay for legal advice and money to discharge a legal judgment are what you really need to know about E&O insurance. Without those two benefits, many financial professionals are unable to emerge intact from a legal battle they fight hard to win, but lose.

E&O Insurance Is Not Commercial General Liability Insurance

Financial professionals often assume that purchasing a commercial general liability (CGL) policy will cover their E&O losses also. Unfortunately, CGL policies are not designed to protect firms against E&O problems. For example, CGL insurance will not pay benefits if your error or omission causes a customer to lose money. It will only pay when your mistake produces property damage or bodily injury to your buyers or to a customer of your customer.

There are a number of other differences between CGL policies and E&O insurance. Suffice it to say, if you’re involved in the sale and delivery of financial services, it’s important to have both CGL insurance and E&O insurance to have comprehensive protection —as well as full peace of mind.

Your Best Defense against Lawsuits, Damages, and Counterfeit Claims

In short, your best defense against lawsuits, damages, and other business claims is to do business ethically, legally, and with a commitment to quality in every facet of your business. However, as we mentioned earlier, mistakes do happen. So it’s also important to defend yourself against lawsuits by purchasing a high quality, affordable E&O insurance policy that will provide funds to pay for legal judgments and settlements that otherwise might bankrupt your firm.

The bottom line? Would you drive your car without auto insurance? Raise a family without insuring their medical expenses? Buy a house without insuring it against fire and theft? Of course not! So why would you operate a business without protecting it against the threat of getting sued?

Do the wise thing and protect your business against E&O claims today. And if you’re pressed for time, considering purchasing E&O insurance from an online provider such as By visiting our user-friendly site, you will be able to select, apply for, and print out your proof of coverage in short order. It’s yet another reason to do the right thing for your business before it’s too late.

How Can a Policy of E&O Insurance Save Your Business?

As much as financial professionals would like to be perfect, they aren’t. They are prone to making mistakes because they are human. And those so-called errors & omissions can be expensive to resolve, at best, and fatal to a business, at worst. Fortunately, a policy of E&O insurance can save their business with proper planning and commitment.

Part of the problem is every segment of the financial world has become more complex over the years. Whether it’s life or health insurance, investments, property-casualty insurance or real estate, the amount of knowledge required to do business has exploded. The regulations that affect professionals have become mind numbingly complicated. For example, the U.S. Department of Labor’s Fiduciary Rule, slated to take effect in April 2017, includes over 1,000 pages of dense requirements. And the technologies professionals use to do business evolve so quickly it’s hard to keep up. In this environment, it’s easy to make a mistake through lack of information or time or through a sloppy mistake.

What’s more, even an innocent mistake can explode into a nasty client lawsuit and a potential financial judgment that can cost tens of thousands, if not hundreds of thousands of dollars, to resolve.

Consider this: according to a top E&O insurer writing E&O insurance for life and health insurance agents, there are at least 11 major mistakes an agent can make, ranging from misrepresentation, premium errors, and failure to explain or provide coverage to policy change errors and beneficiary-related mistakes. But making a mistake is just the beginning. The same insurer found that the average insurance settlement for a disability-insurance related claim was $149,000. Experts say claim costs for large investment accounts can easily hit half-a-million dollars or more, depending on the amount of assets under management.

Being on the hook for a six-figure or higher legal judgment is not something most financial professionals can fund out of petty cash. In fact, most would have to liquidate some or all of their assets in order to pay for a significant legal judgment. How would you pay for a bill this large? Would you have to declare bankruptcy in order vacate your legal liability? How would you continue to meet your financial commitments—say, sending your children to college or funding your own retirement?  If you had to put your entire financial life on hold in order to deal with a nasty E&O dispute, then E&O insurance is made to order. Without a doubt, errors & omissions are human, but relief from liability is divine.

Don’t Get Left on the Hook for Mistakes You Didn’t Mistake

Compounding matters is that many E&O claims fall into the nuisance category. Sometimes clients take offense at their financial advisor for bogus reasons and retaliate by bringing suit. Other times, they have unrealistic expectations about how their financial products should perform or believe their advisor sold them a bill of goods when in fact, they failed to listen to their advisor’s explanations. Whatever the cause, nuisance lawsuits constitute a large portion of America’s legal docket. But this doesn’t render them meaningless; financial professionals still have to defend themselves against even the craziest of lawsuits.

Imagine being sued for something you didn’t do and then losing a court battle. Wouldn’t that be the ultimate case of adding insult to injury? A better solution: Don’t get left on the hook for mistakes you didn’t make. Research your financial liabilities and then shop for an affordable, yet comprehensive, E&O insurance policy from a provider such as This is crucial because even though you might be dealing with a nuisance claim, the costs in time, money, and aggravation are all too real. Being properly insured with E&O coverage will ensure you aren’t left holding the bag financially for something you didn’t do.

Get the Proper Insurance Policy to Fully Cover Your Company

However, locking down this protection doesn’t just happen. You need to get the proper insurance policy to fully cover your company. How? By doing your research and shopping for high-quality coverage that is affordably priced. Here are some pointers that might help you achieve a desirable outcome.

  • First, if your needs aren’t overly complex, take a look at policies issued on a group basis. This typically will yield cost advantages due to the lower costs of insuring large numbers of individuals on a common platform. But if you have an extremely large business and are looking to also insure sub-agents and brokers, then you may wish to consult with an E&O insurance broker. Should that be your situation, understand that dealing with individual brokers will typically require more effort and time due to the complexities of assessing larger risks and shopping them around to multiple insurers.
  • Second, try to take advantage of providers that offer streamlined E&O insurance underwriting, using a limited number of risk-assessment questions to determine eligibility. With such entities, you might be able to receive a lower premium if the company determines you are an attractive risk.
  • Third, check out online E&O shopping platforms, which greatly reduce the time and effort of dealing with bricks-and-mortar insurance agencies. At, for example, the average buyer can select appropriate coverage, fill out an application, and pay for and bind their insurance in 5 minutes or less.
  • Fourth, once you have the proper E&O insurance policy for your business, strive to keep it in force. This will eliminate any coverage gaps that could leave you uninsured when you need full coverage the most.

In conclusion, E&O insurance is designed to help financial professionals mitigate the risk of getting sued, a risk that can be substantial because they are human and prone to making mistakes. But self-insuring this risk is no longer necessary—or recommended—because  relief from liability isn’t just readily available and affordable, it’s divine!

Do You Really Need a Full Policy of E&O Insurance for Your New Business?


As a financial professional, do you lead a full life—rich with family, friend, hobbies, travel, and the like?

Do you enjoy buying gifts for your small children or helping your grown ones achieve their life goals?

Do you still get a lot of enjoyment from your career, both from a financial and client-service perspective?

If you answered, “yes” to all these questions, then you have a life full of meaning and joy. But what would happen if you lost your job or if your firm went under? Or what if you lost all your savings due to a prolonged client dispute? What would your life be like then? Would it be as enjoyable and worthwhile as it is today? Probably not. Which is why you should take steps today to protect your business, career, and family against the devastating impact of a client lawsuit. How? By purchasing affordable and comprehensive E&O insurance.

This recommendation is even more important for financial professionals who are new to the industry or who have just set up their own firms. These transitions greatly increase the risks of getting sued, making the need for insurance much more acute.

What a Full Policy of Errors & Omissions Insurance Can Do for Your New Business

You’ll notice our repetition of the world “full.” That’s because when it comes to protecting your busy, enjoyable life, there’s no substitute for a high-quality, comprehensive E&O insurance policy, especially one provided by a top-rated insurer and a well regarded administration firm. What can a full policy of Errors & Omissions insurance do for your new business?

For starters, it can provide peace of mind. You can go about working in your business without constantly second-guessing yourself and worrying about whether an unhappy client will sue you.

E&O insurance also provides financial benefits in the event you do get sued. These take the form of helping you retain and pay for an attorney, covering the administrative costs that your attorney might incur while defending you, and paying for legal judgments should you lose a case in court. Plus, in the latter case, your E&O policy will pay for any court costs a judge imposes on you.

Errors & Omissions PolicyAnd there’s the value of not having to deal directly with a plaintiff and keeping tabs on your case while it wends its way through the legal system. With E&O insurance, your insurance company will assign a claims adjuster to help manage the details of resolving your claim so you can focus on continuing to work in your business.

What’s more, E&O insurance policies typically cover other expenses that many financial professionals never think about:

  • The costs of retaining an expert witness to buttress your case.
  • Money needed to hire an arbitrator or mediator should you and the plaintiff decide to pursue an alternate path to dispute resolution.
  • Finally, expenses incurred during the process of settling the claim.

Put all that together and it’s easy to see that a full policy of errors & omissions insurance will greatly preserve your ability to enjoy life, both today and decades from now.

The Best Way to Limit Your Accountability for Errors & Omissions

Buying and keeping an E&O insurance policy in force is the best way to limit your accountability for errors & omissions. However, as important as that is, it’s also important to prevent the need for ever having to use your E&O policy. Appropriate risk management is the answer. To that end, here are ten tips to help you avoid client disputes from interfering with your life:

Tip #1: Be a True Professional.
There is no short path to professionalism. Do your homework and know what your clients need and which products best meet those needs. Keep expanding your knowledge base by earning industry designations and completing continuing-education coursework. And always stay up to date with your regulatory requirements.

Tip #2: Take Responsibility for Due Diligence.
Never delegate due diligence to a third party. This means don’t take another advisor’s or another company’s word at face value. Investigate all product claims and fine print yourself so you can be sure your clients will be well served. Also, make sure all products and investment programs you offer are legitimate and fully compliant with regulatory requirements.

Tip #3: Don’t Stray from Your Specialty Area.
Only recommend products you are comfortable with and have sold in the past. If you’re uncertain, get support from your marketing organization or from another advisor in your office.

Tip #4: Follow All Solicitation Rules.
Make sure your solicitation materials are clear and don’t misrepresent your offerings. And avoid designing your own marketing materials; instead, rely on company-provided materials. But if you do create your own, be sure to secure all required approvals.

Tip #5: Engage in Full Disclosure.
Provide all required disclosures and candidly answer all client questions about your track record, business approach, and third-party relationships.

Tip #6: Complete Thorough Fact-Finding
Always schedule enough time to do comprehensive fact-finding with a prospect. Dig up and record all relevant facts, especially regarding appetite for risks. Then link all recommended solutions back to the facts you uncovered.

Tip #7: Always Make Suitable Recommendations
Make sure to present only suitable solutions, giving the prospect several from which to choose. After prospects agree to purchase your product, review their reasons for buying and get their agreement in writing.

Tip #8: Educate Clients about What They Bought.
Make sure clients understand how their products work—benefits, costs, exclusions and the like. Misunderstanding features and benefits is a major cause of E&O disputes, so be sure to fully educate your clients early in the game.

Tip #9: Leave a Paper Trail.
This may well be the most important technique of all. Always document key decisions, including those to refuse coverage, in writing. You’ll need this paper trail in order to defend your actions in court.

Tip #10: Avoid and Then Resolve Client Complaints.
The best complaint is the one you never have to deal with. Try to smoke out client dissatisfaction early in the relationship before it progresses into a legal dispute. How? By paying close attention to what they say about what they bought and about your personal service. Also, observe what they don’t say – their expressions, body language, etc. In most cases, there will be weeks, if not months, of warning before a client sues you. Take action during this period to resolve any festering discontent before it becomes a formal complaint or legal action.

The point is this: everyone wants a life full of joy and satisfaction. But it’s hard to live that life when you have financial risks hovering over you. It’s even harder to enjoy yourself when you’re looking at spending your life’s savings on a legal judgment that could have easily been funded with high-quality, affordable E&O insurance. Bottom line: the best way to limit your accountability for errors & omissions is to purchase comprehensive protection through a firm such as, backed by top-rated insurers and professional administrators.