If you are a licensed professional in Texas, you should consider getting an errors and omissions insurance Texas (E&O) policy to protect yourself if you committed an error that led to a lawsuit. Acquiring one is an important risk management move to protect your career.
An E&O coverage is important for those who make a living out of their expertise, experience, and educated opinion. Some professionals who use E&O are involved in accounting, finance, engineering, architecture, medicine, law, and real estate. In fact, most states would require professionals to get coverage to maintain their real estate license.
Every profession comes with its own set of risks. No matter how good you are at your job, you may encounter a dissatisfied client that would try to make up for their “losses” by suing you.
Legal fees can easily drain your life savings. If found guilty, you will be asked to pay a huge settlement. Even if the court grants the case in your favor, you still end up spending a lot of money defending yourself in court. An errors and omissions insurance can help you deal with this financial burden.
What is the purpose of E&O insurance?
An E&O policy is also known as professional liability insurance. It protects professionals from any actions that will hold them liable against claims of negligence or failure to perform their duties.
Basically, it is the insurance you need to protect your assets and career from lawsuits if you are accused of professional misconduct by your clients.
For example, a real estate agent is being sued by a client because the house they just bought had a termite problem. Whether the real estate agent was aware of the problem or not, an error and omissions insurance should help cover the financial burden of going to court.
Professional liability vs. general liability
Some professionals in Texas think that general liability insurance is enough. The thing is, a general liability insurance coverage is limited to bodily injury, personal injury, and property damage. A general liability insurance addresses direct forms of harm.
A professional liability coverage is needed for legal battles that are caused by a mistake you made on the job or for protecting yourself when you are falsely accused by a client. Defense costs are not covered by general liability.
This is why most professionals and business owners who are looking for an insurance policy opt to get both professional and general liability insurance coverage.
What does E&O cover?
The E&O coverage varies from one insurance provider to the next so it is important to get a quote from providers and compare them thoroughly.
Here is a list of what is usually included in an E&O coverage:
- Errors in services given
- Omissions
- Alleged or actual negligence
- Undelivered services
- Breach of contract
- Copyright infringement
- Misrepresentation
- Inaccurate advice
- Missed deadlines
- Violation of good faith and fair dealing
An E&O will help cover attorney fees, court costs, administrative costs, settlements, and damages up to the amount that is specified by your insurance contract.
Take note that you will only be covered if the claim is filed within your policy period. The incident should occur on or after your E&O insurance policy’s retroactive date.
What is not covered by an E&O policy
The following items may not be included in most E&O policies:
- Criminal prosecution
- Property damage
- Fraud
- Customer identifiable information
- Patents or trade secrets
- False advertising
- Bodily injury
- Discrimination or harassment
- Employment issues
If you want coverage for these areas, you can get them through other types of insurance policies or request them as an add-on coverage from your carrier for an additional price when you get a quote.
Is errors and omissions insurance Texas required?
Most professions that need a license to work are required to get errors and omissions coverage to get or maintain their license.
For instance, real estate agents and brokers are required by TREC to get coverage if they want to do their job in Texas.
Most states require this coverage since the cost of professional liability cases can be so expensive that it can put any business at risk of closing and can push the professional involved to bankruptcy.
The layer of protection that an E&O insurance Texas can provide will help more businesses and professionals stay afloat despite the challenges.
In fact, some clients would often require you to have an E&O insurance since this would guarantee that you will be able to pay a settlement if ever you fail to do your part.
How much does an E&O insurance cost?
Multiple factors determine how much error and omissions insurance for insurance agents will cost in Texas. Aside from the type of policy and coverage you want, there are factors that the insurance services companies will look into that determines your premium:
Business risk
If you are a professional in a high-risk industry, you will be asked to pay a higher premium.
Location
Rates will vary also depending on where you do your business. Professionals in a busy city pay higher premiums compared to professionals in a small town.
Claims history
The insurance provider will look into your claims history. If it has been found that there were claims made against you or your business, you will be paying a higher premium.
Day-to-day operations
Another area that most insurance providers check when you get a quote is your day-to-day operations. Are you implementing measures that will protect yourself if you get sued? The more secured your situation is, the lower your premium will be.
Coverage limits
The type of coverage you want will also affect the cost of your E&O policy. The more coverage you want, the higher the premium will be.
Conclusion
When a client hires a licensed professional for their specialized skill, the client expects results and a reasonable standard of service and care. If your work falls short of that standard, the client can choose to sue you for professional misconduct. And this is often the case if your mistake costs the client money.
Being careful and good at your job will not make you and your business immune to lawsuits. These days, lawsuits are so common that even the littlest arguments are being settled in court. This makes it more necessary for you to protect yourself from possible legal battles.