We live in an extremely litigious era, and no matter how unintentional a mistake might have been, or how baseless a client’s claim might be, many people turn immediately to the courts and file law suits to seek some kind of compensation for damages real or perceived. This is where companies and individuals can turn to Errors and Omissions insurance for legal protection in these circumstances.
When a customer takes you to court over any errors or failure to complete the work that was stated in the contract, Errors and Omissions insurance can cover your costs. Contract performance disputes can be very detrimental to a company, but if you have a good insurance policy, you are much more likely to survive it.
This type of insurance can be applied to almost any business, but it is especially useful to a company in the services industry. When you offer a service for a fee, you don’t have as much tangible proof that the job was done correctly. That’s why customer will more often try to dispute those results and turn to litigation.
Errors and Omissions insurance in the service is very much like malpractice insurance for the medical industry. The fact is that sometimes things go wrong in these industries, despite your best efforts to make sure everything worked smoothly. In these instances it can be a great comfort to have something to fall back on.
A company can do everything in their power to finish a task as outlined in a contract, but sometimes things happen that prevent it from happening. This could be due to the poor performance of a single employee, or a horrible accident on the job. But just because the situation was out of your control doesn’t mean a client won’t seek some form of compensation. You better be ready for it.
Different insurance companies will, of course, offer different levels of Errors and Omissions protection, and you should make the sure coverage is right for you. There may be some options you don’t need, and there are some features you don’t want to miss. Either way, make sure that you understand your policy and how it will protect you.
Your policy should at the very least cover all possible judgments against you and any of the court fees and lawyer costs that are associated with litigation. Whenever you go to court, these costs can quickly add up and hurt your company if you can’t afford them all. The policy should also cover you whether the error was made by a W2, full time employee or a 1099 subcontractor.
Unfortunately, many companies forget about the benefits of Errors and Omissions insurance. They believe that since they haven’t had any problems so far, they’ll be fine in the future. But the fact is that it only takes one litigious customer to cause serious problems. The right policy, however, can help you avoid them all.
