errors and omissions insurance What's Trending in Errors & Omission Insurance | Axis Error & Omission
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What’s Trending in Errors & Omission Insurance


Professions Vulnerable to E&O ClaimsProfessions Vulnerable to E&O Claims

An article published in Insurance Business America (IBA) Magazine last month highlighted several trends in certain professions regarding Errors & Omissions (E&O) insurance. Before we review these professions, let’s first take a look at what E&O insurance is and how it works.

E&O Insurance Defined

E&O insurance covers professionals for claims of negligent acts, error or omission during the course of providing one’s professional services that results in financial loss for the clients. Specific policies can be crafted for a broad range of professionals including architects and engineers, attorneys, design/build contractors, property managers, mortgage lenders, title agents, real estate agents, insurance agents, physicians (medical malpractice), business consultants, IT companies, and many others.

E&O insurance provides defense coverage and will pay for judgments for covered claims up to the amount of the policy. It is typically written on a claims-made basis, which means that coverage is triggered if a claim is made during the policy period for an error or omission that occurred after the policy’s retroactive date (prior acts coverage date). The retroactive date of inception or prior acts coverage date is one of the most important issues to understand when purchasing E&O coverage. Prior acts coverage defines just how far back in your professional services career E&O coverage will extend. Some plans may offer no prior acts coverage, which means that you are only covered for E&O claims that arise from activities occurring after your policy effective date.

Moreover, an E&O policy can be customized with several features including an Extended Reporting Period (ERP), commonly referred to as “tail” coverage, which provide some degree of E&O protection to the professional who has left the business, become disabled or retired.

Why is E&O insurance needed? Just take a look at our litigious society. According to Pacific Research, in 2012 American spent $251 billion in civil litigation. The average award given to plaintiffs suing businesses and their owners was $80,000.

E&O Trends in Specific Professions

Within the real estate industry, the IBA article cites that since housing bubble this sector has undergone increasingly more scrutiny. In fact, it’s estimated that 20% of all real estate agents and brokers will be involved in a lawsuit during their career. One area spurring litigation is property appraisals. Property owners will allege that the given value on a property was too low, causing him or her to sell a house at a lower value. Or, the reverse may happen in which it’s alleged that a property was valued too high causing a buyer to pay too much. The mortgage industry is also facing increasingly more E&O claims as financially strained individuals seek redress.

Additionally, accounting firms are vulnerable to increasingly more lawsuits, especially those dealing with high net worth clients with access to sensitive data. According to the IBA article which cited data from McGraw-Hill, as the commission rates for accountants are high-yielding, successful E&O litigation can bring in as much as $300 million in awards.

Attorneys themselves are also not being spared from litigation. According to the article, although attorneys don’t face the same level of liability as physicians, they are neck-in-neck with real estate brokers and insurance agents in terms of E&O suits.

Moreover, those providing technology services are increasingly exposed to E&O claims, particularly in the area of cyber. A company on a computer network project is exposed to a professional liability claim if their client has a data breach. It’s very important that E&O insurance and Cyber Liability coverage round out a professional’s insurance program.

Axis Insurance Services specializes in E&O insurance for a wide range of professions, bringing a level of experience and expertise second to none. We will evaluate your specific firm’s needs and help determine the type of policy you need to protect you against professional liability suits. Give us a call at (877) 787-5258.

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Blogged on: January 23, 2015 by Mike Smith
Error Omissions
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