When an error is made by a real estate agent, accountant, consultant or other professional, the financial loss incurred by their client can be substantial. To learn how Errors & Omissions (E&O) Insurance can help protect professionals, we spoke with Erica Rangel, Manager, Professional Liability, Burns & Wilcox, Chicago, Illinois.
What are some of the greatest risks today as it relates to professional errors?
E.R.: The greatest risks typically are companies entering into contracts to provide a service and then not fulfilling their scope of work within that contract, causing that client to lose money. If you are providing a service for others, you should have an E&O Insurance policy. We provide E&O Insurance for any business that performs services for a client where there is a risk of financial loss.
What should professionals be aware of relative to these risks?
E.R.: Each business is different. It is important to make sure that we are crafting an insurance policy that covers that specific professional for what they are doing. There is not a one-size-fits-all solution for businesses.
How does E&O Insurance help them respond to these threats, and what are some examples of covered expenses?
E.R.: All E&O policies cover negligent or unintentional breach of duty. Depending on the industry, we can add enhancements to policies such as contingent Bodily Injury and Property Damage (BI/PD), Cyber, third-party discrimination, and media/personal and advertising injury. Typical covered expenses are defense costs and claims expenses, including attorney fees, fines and penalties, and damages like monetary judgments or awards that you are legally obligated to pay. Some policies include punitive damages where insurable by law.
Can you provide an example of a scenario you have dealt with that would be illustrative of the types of risks we have been discussing?
E.R.: A property owner alleges fraud and breach of contract against a property damage claims adjuster. The property owner alleges that the claims adjuster improperly underestimated the hurricane damage on their property and therefore, the insurance company did not fully compensate them. Another example is a financial consultant whose client alleges that they failed to provide adequate advice regarding the riskiness of the purchase of assets and the likelihood of a termination fee, causing the client a financial loss.
What else should professionals know about mitigating their exposures?
E.R.: By using an insurance broker, you have more eyes on the policy to read through exclusions and the different policy forms to make sure that coverage is not excluding what they are actually doing. There are a lot of direct-to-consumer portals now for insurance, and the problem with that is if their situation is a little more complicated, it may not cover everything. By using a broker, you can tailor the coverage to meet your needs. Sometimes, E&O Insurance is an afterthought, but it could be very costly to the insured if there is a claim and they do not have insurance for it. Rates are low right now, and it is typically easy to get a quote.
What are the greatest opportunities for brokers to get into E&O Insurance?
E.R.: It is important to be detail-oriented and be able to walk a professional through their different exposures that they may not think they have. There are businesses that have been around for a long time that have never carried E&O Insurance. The market is so soft right now, with a lot of capacity and relatively inexpensive pricing, so they should be able to get affordable coverage.
What advice would you give brokers to increase their success rates with E&O Insurance?
E.R.: Learn the differences between coverage forms, know the different carrier appetites, and understand which form would be better suited for that particular insured. Knowing the different carrier appetites and what is available can help their success rates.
What advice would you give brokers on targeting professionals to sell this coverage to?
E.R.: If a broker is focusing on a specific industry, honing in on those exposures can help sell this coverage. E&O Insurance for contractors has historically not been a coverage that is purchased. We have been able to have contractors successfully buy E&O Insurance because they realize there is a risk there, their contracts are requiring it, and it is affordable.
What features of E&O Insurance are specific to Burns & Wilcox, and what are the advantages of these?
E.R.: An advantage of using Burns & Wilcox is having an experienced insurance broker who is focused on professional liability work on the account. A Commercial General Liability (CGL) Insurance broker, for example, is not working on E&O Insurance. A dedicated professional E&O Insurance team is an advantage.
Why your clients might need it: If you are a professional in accounting or real estate, for example, E&O insurance is critical when there’s a risk of financial loss for the client.
Protects against: Negligent misstatement and negligent misrepresentation are typically covered. Some policies will cover third-party discrimination, and others will extend to personal and advertising injury.
Expert opinion: “There are businesses that have been around for a long time that have never carried E&O Insurance. The market is so soft right now, with a lot of capacity and relatively inexpensive pricing, so they should be able to get affordable coverage.”
