What errors are typically covered by E&O policies?
E&O policies generally offer protection against various mistakes professionals might make. Coverage can include various instances of wrong advice. With the right policy terms, coverage could apply in situations when:
- A real estate agent neglects to mention a house's historic landmark status, which prevents the buyer from making desired renovations.
- A paralegal misses a deadline for submitting documents to the opposing counsel, putting their client's case at risk.
- An investment advisor makes a data entry error, leading to substantial losses for their client.
- An accountant mistakenly transposes figures when preparing tax documents, resulting in significant penalties and interest years later.
- An architect miscalculates structural specifications, causing costly delays and modifications in a construction project.
- A marketing consultant fails to verify legal compliance of an ad campaign, leading to fines and reputation damage for the client.
What does "claims made" coverage mean in an insurance policy?
Many E&O insurance policies are written as "claims made" policies. These policies generally determine coverage based on when a claim is filed rather than when the alleged incident took place. This approach to coverage can be helpful when pinpointing the exact timing of an incident is challenging.
When evaluating the coverage period of a claims made policy, professionals should carefully consider two aspects:
- Retroactive Date: Claims made policies often include a retroactive date, which is the earliest date an incident could have happened to be covered by the policy. If the incident clearly occurred prior to the retroactive date, the claim might not be covered regardless of when it was filed.
- Tail Coverage: Claims made policies also often include tail coverage, which extends the period during which claims can be filed beyond the policy's end date. If a claim is filed during the tail coverage period, it might still be covered.
An insurance agent who specializes in E&O policies can help professionals review retroactive date and tail coverage options.
Can errors and omissions cover claims made after a professional has retired?
Errors and omissions policies may cover claims made after a professional has retired or sold their business, but this usually requires the purchase of an extended reporting period (ERP) or "tail" coverage.
