Errors and omissions insurance is a special type of coverage for businesses that are susceptible to claims of negligence. Some of the specialists that can protect themselves with this type of coverage include doctors, lawyers, therapists and the like. Financial specialists and tech companies can benefit from purchasing this type of coverage, as well.
The way it works is that the business will pay a monthly fee called a premium to have its company covered for a certain amount. If a situation ever comes up, the person who is in charge of the policy will have to file a claim with the insurance company. The insurance company will review the situation to see if paying the claim can be justified. If the answer is yes, the insurance company will release a certain amount of funds to cover a variety of costs.
The insurance pays a lump sum of money out to cover the incident. For example, if a client feels as though an attorney failed to disclose specific information that could have caused the judge to rule a different way. The policy would pay the injured person if the insurance company found that the claim was justifiable and eligible for payment.
There may be a deductible that the covered party has to pay before the insurance company offers payment. All of the details should be worked out when the business is first signing up for the insurance. Coverage amounts may vary from hundreds of thousands to millions depending on the type of business it covers and the volume of business that it does.
This type of policy also covers libel, slander and defamation of character cases. Those cases can come about when someone does not realize that it is putting another company or an individual under public scrutiny. E&O insurance is the tool that will protect the covered company so that it does not lose all of its assets in the process of being sued.
The E&O insurance covers the cost of the attorney’s fees that may come about because of a claim. They will pay for the insured company to have adequate counsel to defend itself.