Protection from Everyday Mistakes

E&O Insurance“Protection from everyday mistakes.” It’s a prosaic phrase with profound meaning once you start thinking about it. “Everyday mistakes” refers on the surface to the small errors & omissions that nearly every business professional makes at one time or another.

  • Failing to fill out a form correctly.
  • Forgetting to return a client’s phone call.
  • Not scheduling a follow-up client meeting as promised.

None of these mistakes sounds particularly ominous. And most will have no practical consequences except, perhaps, for dinging a business owner’s reputation.

But—and this is a big “but”—a small percentage of these common errors can lead to serious consequences that harm a client financially and that may eventually lead to a big-ticket lawsuit. Think about it. Your mistake in filling out an insurance application isn’t a huge deal until it delays the issuance of a client’s insurance coverage, leaving the person uninsured for a catastrophic illness. Or your failure to return a phone call is irrelevant until a client’s business insurance fails to perform as expected because you failed to conduct a much-needed risk analysis. And not scheduling a client review session is inconsequential until a client dies shortly afterward with no life insurance in force.

In short, everyday mistakes happen all the time, but their impact can be anything but routine. Protecting against these situations is what E&O insurance is all about. It provides the cushion against everyday errors that allow financial professionals to continue in business even after getting hit with—and losing— a massive client lawsuit.

Coverage of Fees and Lawsuits

Once a financial professional’s mistake sparks a devastating lawsuit, business professionals will likely react with shock and confusion.  Shock because it inevitably surprises people that a client with whom they have served for months or years—and who seemed perfectly content—is now suing them. The reality is that not all client relationships are what they seem. They may appear to be amicable on the surface, but a series of minor errors—or one large one—can eventually undermine the relationship. Even though receiving a notice of lawsuit may come as a surprise to the defendant, the plaintiff, despite having a smiling face, might have been unhappy and planning to take legal action for months, if not years.

Confusion is another common reaction, particularly for financial professionals who’ve never been sued before:

  • What do I do?
  • What should I tell my aggrieved client?
  • Should I try to negotiate a settlement before the matter even gets to court?
  • What information do I need in order to prove my innocence?
  • How will I do all this while still handling my regular duties in the business?

All of these questions will be swirling in a financial professional’s mind in the hours and days after getting sued. Worse, making another mistake in responding to the lawsuit can compound the financial damage of getting sued in the first place.

This is why having E&O insurance is so important. Professional liability insurance policies are designed to minimize the shock, confusion, and financial impact of getting sued. Within days of you filing an E&O claim with your insurer, it will select and pay for an attorney to defend you. This person will guide you in terms of what information will be needed to marshal your defense. He or she will also handle all communications with the plaintiff’s attorney so that you don’t have to worry about what to say and do.

What’s more, your insurance coverage will also provide access to a professional E&O claims adjuster, who will manage the process of resolving your claim. This person will co-ordinate with your attorney and with the opposing parties to make sure the matter is resolved as quickly as possible.

But getting help from an attorney and E&O claims adjuster isn’t the only benefit of having E&O insurance. Your policy will also pay for a number of ancillary charges that can add up, especially with complicated lawsuits. These include:

  • Expert witness charges,
  • Copying, filing, and software-related expenses,
  • Arbitration or mediation costs,
  • Expenses related to settling the claim.

Most importantly, E&O insurance will provide a financial backstop to you should a judge find you guilty of negligence. If the judge sides with the plaintiff and orders you to pay damages, your E&O policy will cover that payment, up to the limits of your policy. Since this payment can total thousands if not hundreds of thousands of dollars, the ability to transfer this liability to an insurer is literally worth its weight in gold.

In short, operating a business can be an inherently risky proposition. In most cases, everyday mistakes will have no financial impact. But in rare cases, they can generate substantial financial demands that uninsured business professionals will be hard-pressed to meet. This is why having E&O insurance can not only preserve your personal financial security but, also ensure the very survival of your business.

For more information about securing E&O insurance for your business, visit today for more information.