Let’s discuss the basics of Errors and Omissions, Professional Liability, and Malpractice Insurance.
Let’s begin with the basic 101, all of the above insurance coverage are for the most part the same. All are terms that refer to liability coverage that covers a person or a business if it makes an error, or mistake, as it provides its service to its customers (patients in the case of medical malpractice insurance). Anyone with a business, who provides a service, needs this insurance.
Why you need Errors and Omissions Insurance, or Professional Liability Insurance, or Medical Malpractice Insurance
We find there are lots of businesses, who think they do not need Errors and Omissions or Professional Liability Coverage. They wrongly assume that their General Liability will cover them. General Liability normally excludes professional services.
Some people think their corporate shield will protect them. Good luck with that one! It is true that the corporate entity may shield you from personal exposure, but how long will your business or practice last while there is a Keeper appointed by the court sending notices to all your customers to pay him, not you?
In general, Errors and Omissions Insurance AKA E and O Insurance (or any of the other names in the title of this blog) is affordable and well worth it.
How to pick the right coverage
You will be given an application when you apply for professional liability insurance. Make sure you take lots of time to complete it fully and accurately. If the application does not allow you to describe what you do, add an addendum describing what you do. Be very accurate. You want to be fully covered by an insurer, so they need to know what you are doing. Never lie or understate what you are doing, just the whole truth and nothing but that. Then, after you submit your application, you will get some price quotes. Now it’s time to do your homework.
Do not look at price alone. You do not want to save $5K or even $50K now, and find out in the future that you did not buy the best coverage. You could possibly face an uncovered multi-million dollar lawsuit. If you are a pure price shopper you will get what you pay for in E and O Insurance, and you will not obtain the coverage that you need.
Doing your homework
First, go to Ambest.com and look up all the insurers from whom you received quotes. You want an insurer with billions in assets and an A, or A+, or A++ rating. You can also consider A- insurers, but A+ or A++ is ideal. This grading is AM Best’s way of designating what the insurers’ financial strength is; thus A++ is the highest grade it can assign. Never buy insurance from an insurer with a grade below A- , unless you have no choice. Once an insurer is in the B grade area, or lower, or worse no grade at all, the chances of it not being in business when you have a claim are higher. Like in school, you want the highest grade you can achieve.
Ask questions
Then, ask for a copy of the specimen policy with all the endorsements that apply to you. Quotes are not the coverage, the policy is. Look at the policy pages that show what is excluded first. If you see anything that may affect you having coverage, start asking questions. The same goes for what is covered, but we find that what is not covered most is telling.
Furthermore, ask specific questions in writing, and ask for a written response from the insurer via the broker. Save that response in your file. Also, it is a good idea to pay for an hour of your attorney’s time to review the policy. An insurance policy is a contract, and unless you or your broker has a JDL, you are not qualified to review a legal document fully.
Remember, this insurance policy can save you and your business millions of dollars, so choose wisely and do your homework before you purchase the insurance coverage.
HCP National Insurance is a provider of Errors and Omissions, Professional Liability, and General Liability Insurance for small businesses. We are experts in small business insurance, health care insurance, D and O and E and O insurance, medical malpractice insurance, and all other insurance coverage. Our home office is located in Aliso Viejo, CA.
NOTE THE ABOVE IS A GENERAL DISCUSSION ABOUT HOW COVERAGES MAY WORK. YOUR INSURANCE POLICY AND ALL ADDENDA ARE THE ONLY AUTHORITY OF HOW YOUR COVERAGE WORKS. DO NOT RELY ON THIS ARTICLE AS AN EXPLANATION OF YOUR COVERAGE. HAVE YOUR ATTORNEY REVIEW YOUR ENTIRE POLICY WITH YOU TO DETERMINE WHAT IS AND ISN’T COVERED.
