How Do I Know What Kind of E&O Policy is Right For My Business?
When selecting errors and omissions coverage, an important thing to remember is that there are no “one size fits all” solutions. Every operation will have very unique needs when it comes to their errors and omissions exposures. Some policies include defense costs within the limit of liability; others may exclude all punitive damages resulting from litigation. The design of each policy can have vast differences and each policy much be looked over meticulously to ensure that it offers all the coverage a business or individual will need.
A good first step to selecting an errors and omissions policy is looking closely at the priors claim coverage that the policy offers. Some policies exclude all prior acts from coverage while others cover acts that took place within a specific time frame. If full prior acts coverage is unavailable under a new policy, purchasing “tail” coverage from an existing policy is a solution to avoiding any gaps in coverage.
For larger companies, innocent party protection is a crucial element of a comprehensive errors and omissions policy. Innocent party protection offers coverage for a company in the event that an agent or other employee knowingly commits an error or omission without the company’s knowledge. For example, if a real estate agent failed to disclose important information about a property without the knowledge of the brokerage he or she represents, the company would be considered an innocent party. However, if legal action is taken, the company would have to utilize its errors and missions policy.
When applying for errors and omissions insurance, one insurance company underwriter may require only a completed application while others will want to copies of contracts, a description of quality control procedures, documentation procedures, training procedures and other information regarding the way a company or individual conducts business. Also, the cost of errors and omissions coverage can vary greatly depending on the class of business, location, and the claims experience of both the individual and the industry of their business.
Many policies are issued on a Miscellaneous Professional Liability form and require numerous changes to perfectly fit a company’s specific needs. Without these changes, an errors and omissions policy could not adequately function for any business. Many businesses fail to realize the gaps in their errors and omissions coverage until a claim is made, resulting in drastic losses.
How Does Errors & Omissions Insurance Work for Real Estate Agents?
Real estate agents have very specific risks associated with their line of business. They must address industry specific issues such as discrimination, appraisals, environmental hazards and pollution, leasing activities, fair housing, consulting, property management, continuing education, risk management counseling, and mold spores and fungus growth. Real estate professionals should look for errors and omissions insurance programs that provide coverage for real estate services such as tenant representative services, joint ventures, corporate services, and owned property.
What Do Computer and IT Professionals Need From Their Errors and Omissions Coverage?
Computer and technology professionals needs a policy that will cover any “wrongful acts”, defined as any actual or alleged negligent breach of duty, error, misstatement, misrepresentation, omissions, personal injury or other negligent act done or attempted by an insured, or any person for whose acts the insured is legally responsible in the provision of technology services to others for a fee or technology products, but only in conjunction with the insured’s provision of technology services to others for a fee.
Some important exclusions from errors and omissions coverage are claims alleging bodily injury (which should be covered by General Liability insurance), intellectual property infringements, fraudulent or criminal acts, liability assumed under a contract in an indemnification or hold harmless provision, Federal or state securities acts, insolvency or bankruptcy of insured, pollution, asbestos, recall, repair, replacement or removal of insured’s products from the marketplace, attributable to any guarantee or ex exceeding cost estimates, electrical or mechanical failure except those caused by insured’s wrongful act, attributable to wear or gradual deterioration of any product sold, claims arising from antitrust, restraint of trade, unfair or deceptive business practices, or unfair competition.
“Insureds” includes the business entity listed on the policy, any subsidiary listed on the policy, respective principals, partners, offices, directors, managers, LC members, stockholders, trustees and employees.
Insurance Agents’ Errors and Omissions Insurance
Insurance agents deal with a vast number of people on a daily basis. Whether supplying insurance for real estate professionals, commercial entities, or individuals, a clients regard their investments is very important. Making a mistake with a client’s coverage can cost thousands, and sometimes even millions, of dollars. When choosing an errors and omissions policy, insurance agents or agencies should be sure their policy allows for a few specific risks, such as surplus lines business, insolvency coverage, managing general agent (MGA) coverage, managing general underwriter (MGU) coverage, insolvency coverage, innocent insured coverage, independent contractors, contingent bodily injury/property damage, failure to remit premium, adverse loss history, and HIPAA compliance.
Directors and Officers Liability Insurance
Directors and officers (D&O) Liability Insurance coverage is an essential part of managing a private or publicly traded company in today’s highly competitive environment. Directors and officers are held to a high standard and their positions are replete with legal responsibilities to shareholders, investors, creditors, employees and others. The roles of the directors and officers have evolved over the past few years into more than just a prestigious title.
For example, directors and officers can be held responsible for a company’s investment decisions including the company’s portfolio and assets. Instances of negligence can include failure properly evaluate the credentials of the individual responsible, the lack of policies limiting the type and length of asset purchases, failure to obtain approval from the board for purchases in excess of certain limits.
Another area where directors and officers can find themselves in trouble is releasing non-public information that affects a company’s stock. The SEC requires companies to follow certain procedures when dealing with company information being released to the public. Without a specific written plan, directors and officers can be held responsible for the effects of releasing such information.
Directors and officers can also be caught in a conflict of interest regarding certain business practices. This is a major area for lawsuits with company directors and officers. Companies should adopt formal conflict of interest policies to monitor these activities and reduce the likelihood of litigation.
All American Brokers is pleased to provide access to a truly affordable Errors and Omissions program.