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     What is E&O Insurance, Do You Need It, And What Does It Cover?

You get insurance in order to protect yourself from DISASTER. When you think of disaster and insurance, you think of bad weather, stolen goods, and unforeseen physical mishaps that can ruin your business if you're not covered. You have equipment to be safeguarded, payroll to be managed, and all other types of business assets and concerns that need to be covered, too. In other words, when people think of insurance for themselves or their business, they think of the physical things that can go wrong with that business, and getting coverage to cover those range of possibilities. The problem is that, with today's business environment, it's just not forward-thinking enough. For business professionals in particular, it's probably only half the equation when it comes to getting yourself and your business properly INSURED.

Errors and Omissions insurance. Ever heard of it? If you're a professional, you better hear of it. Not having it could cost you dearly. Errors and Omissions insurance essentially protects the business professional from lawsuits arising from real or perceived MISCONDUCT resulting from the normal conduct of business. It goes beyond the kind of insurance most people are used to because it covers aspects of a business that impact others when interacting with the public. Errors and Omissions insurance is also known as professional LIABILITY insurance, and the reason liability ought to be of such concern to the business owner is related to the very nature of conducting business in and of itself.

Unlike private individuals and their families, businesses are specifically set up to interact with the PUBLIC as a matter of routine. You normally don't provide a good or a service to a small circle of friends. You set up a business in order to meet a demand that exists out there in the public. That involves interacting with the public and performing exchanges with them in ways that may be even hard for you to perceive. The extent to which a business or a professional can have an IMPACT on the public can almost literally be unimaginable. This is why things like Errors and Omissions insurance are necessary.

Say you're a lawyer. You provide legal counsel to a client. That client then turns around and uses that counsel as a basis to form a contract with a third party. That third party and its contract provide services to the public. Someone from that public believes themselves to be hurt or damaged as a result of that service. Well, it's possible that the claim can be traced all the way back to the original counsel provided to the client. It may seem improbable. But just think how many frivolous lawsuits are in existence. Errors REAL and PERCEIVED can end up costing you.

This is a component of liability insurance that many business owner and professionals might not come to fully appreciate until it's too late. This includes Errors and Omissions insurance. The last thing you want to happen in this regard is to have errors and omissions appraisers come to your door and tell you you're not covered for a particular MISTAKE that comes back to haunt you. Quite literally, the cost could not only be your business, but your REPUTATION as a professional as well.

It's not only errors or mistakes that professionals conduct in the normal practice of business. A plumber might install a wrong kind of pipe. A doctor might prescribe the wrong type of medication -- which gets malpractice liability involved for the professional as well. A tech professional might install the wrong type of software for a computer system. This stuff happens, and errors and omissions appraisers will usually deal with these kinds of issues as a matter of ROUTINE.

Where some of the unforeseen difficulty lies with the conduct of a professional is the possibility of errors or omissions that are simply perceived as such by individuals affected by what you do. In other words, it's not only the real mistakes that you make as a professional that can come back to bite you, it's the mistakes people THINK you make that can cost you dearly, too -- especially if you don't have Errors and Omissions insurance.

You might ask, well how does that work? Think about it. If somebody just thinks your professional conduct cost them harm or injury, you'll need to hire lawyers yourself, which can mean considerable legal fees in and of themselves. There's also the possibility that you'll LOSE a case because a jury doesn't like you, even though you didn't technically do anything WRONG. Just being in the right, or thinking you're being in the right isn't enough. You need a jury to think so, too, and that can sometimes be like rolling the dice at an all-night casino game.

There is also the possibility that, even though DAMAGES were the result of an error incorrectly perceived as such by another party, that they're deemed as damages nonetheless. In other words, damages from perceived errors are still damages, and somebody might be seen as having been responsible. That somebody might be you. Unless you have Errors and Omissions insurance that covers such possibilities, the last people who will want to be your friends in a crisis are those pesky errors and omissions appraisers. They won't necessarily care about what's right, they'll care about what they have to COVER.


James Cochran is the founder of Business Insurance Now, a web-based business insurance agent. With over 12,000 business clients, Business Insurance Now and Techinsurance have grown to become America's leading online provider of general commercial liability insurance for a wide range of small businesses.

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