Understanding Employment Practices Liability
Our insurance experts at Morris & Garritano are here to help you in understanding Employment Practices Liability (EPL).
As an established professional with extensive knowledge in your field of expertise, it is your responsibility to ensure that the I’s are dotted and T’s are crossed in the services that you provide to your clients. Though you may strive for perfection, the reality is that nobody is perfect – sometimes mistakes happen. And if a disgruntled client believes your errors have cost them money, even if it is not true, you might be sued. The cost of defending your company could be a serious drain on your resources. Fortunately, Professional Liability insurance can provide a level of protection.
What Is Professional Liability (E&O) Insurance?
Professional Liability insurance, more commonly known as Errors and Omissions (E&O) insurance, is a special type of coverage that protects your company against claims that a professional service you provided caused your client to suffer financial harm either due to mistakes on your part or because you failed to perform some service.
E&O insurance can cover the cost of defending your company in a civil lawsuit and certain damages awarded, even if the legal action turns out to be groundless. This type of protection is not part of your General Liability insurance.
E&O policies are generally written on a “claims made” or “claims made and reported” basis with some form of retroactive time frame. This means that any claims that arise from errors or omissions that happened before the retroactive date will not be covered. The further back the retroactive date, the broader and more complete your coverage. This is why it is important for professionals who do not yet have E&O to understand that they receive more value from the policy going forward, the sooner it is first put in place.
Why Does My Company Need Employment Practices Liability or E&O Insurance?
Lawsuits, both legitimate and frivolous, are more and more common in California every year. Adding E&O insurance to your risk management program can help protect you from the draining proposition of mounting a defense if a client takes you to court.
Professions that commonly purchase E&O include medical providers, attorneys, consultants, architects, engineers, accountants, financial services professionals, general contractors, and manufacturers. That said, anyone providing professional services and advice to clients could be at risk and should consider an E&O program as an essential part of their business insurance portfolio.
When (and How) Should I Purchase E&O Coverage?
As a general rule, the time to determine risks and the types of coverage you need is before a problem arises, and E&O insurance is no exception. You can even make it a selling point with your clients because it can help them feel greater peace of mind knowing they could be compensated if anything goes wrong.