Why Do Massachusetts Professionals Need Errors & Omissions Insurance?
In today's litigious society, lawsuits can arise from even the smallest errors or perceived negligence. E&O insurance offers legal protection by covering the costs of defending against claims, including attorney fees, court costs, and settlements or judgments.
- Financial Security: A lawsuit can be financially devastating for any business, especially small to medium-sized enterprises. E&O insurance provides financial security by covering the costs associated with claims, allowing businesses to continue operating without bearing the full burden of legal expenses.
- Maintaining Reputation: A lawsuit can tarnish a professional's reputation and erode client trust. E&O insurance helps professionals maintain their reputation by demonstrating a commitment to accountability and responsibility for their actions.
What Types of Claims are Covered by an Errors and Omissions policy?
The coverage provided by a particular Errors and Omissions policy is determined by its specific terms, conditions, and exclusions. Additionally, the nature of the insured professional's field influences the types of claims they may encounter and the necessary coverage under their policy.
Here are several examples of scenarios that professionals might encounter and that could be covered by a policy:
- A lawyer records an incorrect filing date for a case, leading to a missed deadline and the loss of the client's case.
- A real estate agent neglects to disclose all available information about a property in Worcester, MA, resulting in the client discovering later that the property's zoning doesn't align with their intended use.
- A stockbroker fails to promptly execute a client's order, causing the client to incur a significant financial loss.
- An accountant makes a mistake in transcribing a figure while calculating a client's taxes, leading to the client being penalized and charged interest by the IRS at a later date.
Key Features of Errors & Omissions Insurance in Massachusetts
Coverage Limits: E&O insurance policies typically have both per-claim and aggregate coverage limits. It's essential to choose coverage limits that adequately protect your business based on its size, revenue, and potential exposure to risk.
Tail Coverage: Tail coverage, also known as extended reporting period coverage, extends the reporting period for claims beyond the policy's expiration date. This is crucial for professionals who may face claims after discontinuing their E&O insurance coverage.
Claims-Made Policy: E&O insurance policies in Massachusetts are usually claims-made policies, meaning they only cover claims that are made and reported during the policy period. It's important to understand the reporting requirements to ensure coverage for potential claims.
Exclusions: Like any insurance policy, E&O insurance has exclusions. Common exclusions include intentional misconduct, fraud, and criminal acts. Understanding these exclusions is essential to avoid gaps in coverage.
What Are Claims-Made Policies?
Errors and omissions coverage is commonly structured as a "claims-made" policy. These policies typically provide coverage for claims based on when they are reported, rather than when the incident actually took place. Consequently, a policy may extend coverage to an incident that occurred before the policy was enacted.
However, it's important to note that claims-made policies do not offer coverage for incidents regardless of their occurrence timeline. Generally, these policies come with retroactive dates and discovery periods. Retroactive dates typically specify the earliest date for which the policy will provide coverage, with incidents occurring before this date usually not covered. Discovery periods dictate the duration after the policy's effective period during which it will cover claims arising from incidents that occurred within the policy's timeframe.
How Can Massachusetts Businesses Obtain Errors & Omissions Insurance?
For help finding errors and omissions insurance for your business or nonprofit, contact the insurance professionals at Paul T. Murphy Insurance. Our independent insurance agents have helped many organizations in Massachusetts find this coverage, and our team is ready to assist you.
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