We always want to put our best foot forward when it comes to our business. We put in additional time and effort to make sure that we understand the requirements, deliver flawless products and/or services to our clients that exceeds their expectations by adding value to their projects. To do that we try to follow industry level best practices, maintain high quality through and through, set up rigorous control measures to prevent anything going wrong unexpectedly, and so on. But, at the end, we are only human and we make mistakes. Despite all your honest efforts and intentions, a single mistake seems to overshadow all your work and your business is threatened. How do you stop that? When a professional, or a business in this case, fails to pursue reasonably expected standard of care in their offered services or products and that mistake (error or omission) in turn leads to a loss or injury or damage to their customers, then it is regarded as an instance of Professional Negligence. The affected party may file a lawsuit against that individual or the business based on claims of negligence and this in turn can cause a serious damage to the business’s financial reserves and market reputations, even if they are proven not guilty at the end.
As always, it’s better to expect the worse and prepare for preventing it proactively than actually facing the misfortune and then start to fight it. The kind of insurance coverage your business needs at this point is called Professional Liability Insurance, or more commonly, Errors & Omissions (E&O) insurance.
An Errors and Omission Insurance policy covers your company or you as a professional individually, if a client holds you accountable for your provided service (i.e. the errors) or for one that you failed to provide (i.e. the omissions) and as a result, the client suffered some loss or damage or injury. This coverage protects the insured company or person from being forced to bear the full cost of the legal process to defend against the client’s claim of negligence and also helps to compensate for the damages awarded in those civil lawsuits. In most cases, the E&O policies provide coverage for the costs involving defense, judgments and settlements.
These following types of claims are covered under the Professional Liability policy, aka your E&O policy:
The risks of unintentional mistakes like those covered in an E&Y policy are actually present with all types of business and/or individuals, irrespective of the industry they serve or the size or scale of operation. In a nutshell, if your business depends upon knowledge consultations, strategic advisors, selling designs and/or concepts or involves supervision of such related tasks, it should have sufficient exposure to E&O coverage clauses for your provided services.
Here’s a list of different service provider professions and businesses for which E&O coverage is always highly recommended, even though it is not an extensive list:
The best course of action is to consult with an insurance provider and confirm if your business is at risk or not and then procure the required coverage accordingly.
The recommended time to get this coverage in place is right after a risk has been identified and confirmed by a knowledgeable authority and before any actual mishap takes place. As a business owner for any service provider company, you need to thoroughly analyze your risk exposure with a reliable insurance consultant and make this policy a part of your business’ insurance portfolio.
The most important benefits of getting this coverage are as mentioned below:
Do not lose your hard earned money or your client’s trust by leaving it all on chances of zero error delivery. Protect yourself and the business and assure your clients of your reliability as a service partner before anything can go wrong.
Now that we’ve covered the basics of Professional Liability insurance policies in terms of protection against claims of negligence, let us go over a few Best Practices that may help you to avoid the lawsuits effectively for you. Whenever you start working on a new project or an extension of an ongoing project, you can choose to be proactive and take these precautionary steps to be ready to mitigate possible future claims:
Finally, update your knowledge of the current developments in your skills and field of operation, periodically. This will help you to ensure having all the acceptable industry practices updated in your business processes.
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