Having a client approach you to say that you made a serious error can be stressful. The situation becomes much more serious and stressful if the client sues your company for damages. The case and the damages can come at a high financial cost to your insurance agency, and if you need to pay a lot to compensate your client, this can have a huge financial impact on your organization. What kind of defense and damage costs could you incur if a client sued your insurance agency?
What is E&O Insurance?
E&O policies cover financial losses incurred due to errors and omissions made by an agency. According to the Business Benefits Group, “Errors and omissions (E&O) insurance coverage provides protection for business owners and employees against clients who make accusations stating that your business cost them money.” This could be due to an error or omission, or a perceived error or omission on your part or on the part of one or more of your employees.
E&O insurance is essential for businesses that offer advice on an ongoing basis, as it’s possible for advice to be misconstrued or given in error, which can cause problems.
E&O Insurance for Insurance Agents Helps Cover Your Defense Costs
If you need to go to court, you will need to pay the legal professionals who will represent you. This can be very expensive if you don’t have E&O insurance, even if you win. Thankfully, if your agency has E&O insurance, some of your defense costs will be covered. In particular, look for E&O insurance that includes the first-dollar defense option so that all of your defense costs can be covered by your E&O insurance.
What are the costs of working with a lawyer on your E&O case?
E&O Insurance for Insurance Agents Helps Cover Damages
If a client sues your business, they are seeking damages to cover the cost of the problems or losses that your business caused them—or ones that they perceive you have caused. According to InsureOn, “A dissatisfied client could still sue for negligence even when there’s nothing wrong with your work.”
If your agency is found liable for the error or omission, it is likely that you will need to pay damages. This cost can be large or small. However, not all agencies have the backup funds to manage the possibility of paying a number of smaller settlements, let alone a large one.
When it comes to damages, E&O insurance will help you cover a lot of that claim amount. This means that if your client is awarded damages, you will simply pay the deductible. With E&O insurance plans such as the one offered through the American Agents Alliance, there is a $3 million limit for each claim and a deductible waiver available after participating in the program for three years.
When you’re looking for E&O insurance, talk with us at the American Agents Alliance. We offer discounted E&O insurance so that your agency can achieve additional security affordably. Contact us today to learn more about our many programs for independent insurance agencies.