The pain for E&O insurance providers has been widespread in recent years, leading many of them to raise prices on what they charge businesses for coverage.
According to a report from Advisen.com, losses for E&O insurers were expected to run around $3.7 billion over the last several years, with those deficits expected to be widely distributed among insured’s ranging from small mortgage brokers to the biggest global diversified financial services businesses.
In order to avoid being part of an errors and omissions lawsuit, businesses are advised to work with an insurer and deem what is best suited to meet their needs, making sure inevitable mistakes are covered.
A simple mistake for example would be sending a time-sensitive shipment to France instead of Germany, leading to a client losing out on a sale and a huge payday. The client will turn to the forwarder of the shipment and potentially involve them in a lawsuit to recoup lost sales and seek additional damages.
Given that these losses are not protected through a general liability policy, the litigation that a business may be involved in can be both time consuming and costly.
The majority of E&O policies are written on a “claims made” or “claims made and reported” form. This states that any claims must be made or, in some instances, made and reported, within the policy period. These policies have a retroactive date that becomes very important. Claims that arise out of acts committed prior to the retroactive date will not be covered. The farther back the retroactive date, the more coverage provided.
While some businesses may think that E&O insurance is something they can skip out on, it is imperative to take the time to consider the ramifications of not having it.
It just takes one simple business error to set a company back financially and in its customer service reputation.
In order to avoid an errors & omissions mistake, insure today and move forward with your business tomorrow.
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