Professional Liability / Errors & Omissions
February 2, 2015
Author: Joe Karberg, Account Administrator
A lot can go wrong on a construction site, in a doctor’s office, or when hauling freight for a customer. These potential mishaps can then snowball into larger problems that can financially ruin a business. These are also the exact scenarios for which Professional Liability, or Errors & Omissions (E&O), insurance may become a necessity for anyone that is operating a business.
Professional Liability (E&O) coverage is designed to protect traditional and quasi-professionals against liability incurred as a result of errors and omissions in performing their professional services. For this reason, most professional liability policies are written specifically for the type of business in which the insured is engaged. For example, a policy written for a trucking company would obviously differ from a policy written for an architectural firm.
What is the Difference?
A question that is often asked is, “What is the difference between General Liability and Professional Liability (E&O)? Why would I need both?” The simplest answer to this is that General Liability covers you in the event of a bodily injury or property damage. Professional Liability (E&O) covers you against negligence that may arise while the service is being provided. These claims typically arise as a result of a financial loss sustained by the claimant (as opposed to a physical or property damage loss). Also, as mentioned above, General Liability policies are pretty standard whereas Professional Liability (E&O) policies are written specifically depending on the insured’s line of business.
A key thing to consider when shopping for this coverage is the potential cost of legal fees that can arise over the course of a Professional Liability (E&O) claim. In most cases, General Liability policies will pay out defense costs in addition to the policy limits. With Professional Liability (E&O) policies, defense costs paid out will reduce the overall limit of the policy. Therefore, when considering the limit of liability, it often requires the purchase of additional limits or an excess policy to handle additional claims costs.
Who Could Benefit?
Professional Liability (E&O) coverage is as valuable to a freight broker as it is an insurance broker. Should a carrier be given the wrong cargo, or the wrong value of the load is listed on the bill of lading and a claim arises the broker could be held liable. If the broker gives the carrier the incorrect time frame or location of delivery it could cause a financial hardship on the recipient of the cargo. Additionally, a motor carrier could also stand to benefit from Professional Liability (E&O) coverage for the same reasons. If a carrier fails to make a delivery on time, negligently handles cargo rendering it damaged or unusable or delivers a load to the wrong place, the fault would be on them.
There are countless examples in which Professional Liability (E&O) insurance can help keep a company financially sound. Professional Liability (E&O) coverage can help shoulder the burden of these costs and greatly mitigate the risks that your company takes when working with clients.