The Importance of Errors and Omissions Coverage for Inspectors

December 30, 2015

One more from the land of insurance craziness.

One of our brokers insures a plumber. The plumber was asked by a homeowner to come to their house and check for a leak. The homeowner believed they had a water leak. The plumber looked around and couldn’t find any leak. Homeowner paid the plumber $75 for the work. The plumber didn’t install any of the plumbing nor did they do any repair or service work. Well now the homeowner has filed a lawsuit against the insured saying there was a leak and they didn’t find it and the now have damage to the property. The plumber tendered the claim to their General Liability carrier who declined to defend. The carrier states the insureds work didn’t result in any BI or PD nor was the work an “occurrence” under the policy definitions. Basically this plumber performed an inspection similar to that of a property inspector. The GL policy also contains a professional liability exclusion. And the policy excludes breach of contract.

To me what the plumber did was an inspection and since they didn’t do any service or repair work they really created an E&O exposure for this inspection and advice. So, I believe that the denial of coverage is correct.

It’s a really bad situation for the insured and agent.

Just one more potential E&O issue we all need to manage and advise our insureds of the need for E&O insurance if they perform inspections.

Fun times.

Insurance Policies for Businesses

Business Interruption

Business Interruption Insurance is a coverage included as an endorsement (that is, a special add-on) to Property Insurance policies. Its payouts replace business revenue that your business is unable to earn when it’s forced to shut its doors by a covered Property event (e.g., a fire). Business Interruption Insurance allows many small businesses to bridge the gap between when they’re forced to shut their doors and when they’re able to reopen by providing the funds needed to pay rent, employee salaries, loans, taxes, and more. Some Business Interruption policies even offer payments if a business is forced to shut down because of a covered Property event that happens to a supplier or business partner.

Business Owner's Policy

The Business Owner’s Policy, or BOP, is an insurance bundle designed specifically for small-business owners. It combines Property and General Liability Insurance for a single discounted premium. As a bonus, many BOPs also include Business Interruption coverage. To qualify for a BOP, businesses must meet a number of criteria, including having a low risk profile, operating in relatively small business premises, and requiring no more than 12 months of Business Interruption coverage.

Certificate of Liability

A Certificate of Liability Insurance acts as proof of insurance for your clients, customers, or business partners. This one-page document includes pertinent information about your insurance policies, including coverage start and end dates, policy limits, and parties insured. When potential partners want verification that your business is insured, you can show them your Certificate of Liability Insurance. Often, this single document allows business owners to close deals more quickly.

Cyber Insurance

Nearly all businesses these days are involved in E-Commerce in some way, whether it be direct online retailing, processing client payments for services, or simply maintaining a client database. With each passing year, the number of data breaches grows exponentially and it is important to protect yourself from harm in the event that your customer's personal data becomes exposed, like their social security numbers, dates of birth, or payment information. Nearly every day we see security breaches on all levels of business, from mega companies like Amazon and Home Depot, to smaller retail and manufacturing including gas stations and small healthcare offices. In today's climate, it is vitally important that you protect yourself from bearing the brunt of any losses due to hackers or data loss.

Cyber Liability Insurance protects small businesses from damages and expenses related to data breaches and other digital crimes. This coverage is often called Data Breach Insurance or Cyber Risk Insurance. If a virus infects your computer or a hacker steals your customers’ data, your Cyber Liability policy can cover the costs of damage control: alerting your customers, paying for credit monitoring services, defending your business in any lawsuits, and even funding good-faith PR campaigns to restore people’s confidence in your business.
Some of the areas where you will want to cover yourself against cyber crime and data breach problems are:
Errors and Omissions: E&O covers claims arising from errors in the performance of your services. This can include technology services, like software and consulting, or more traditional professional services like lawyers, doctors, architects and engineers. Media Liability: These are advertising injury claims such as infringement of intellectual property, copyright/trademark infringement and libel and slander. Due to the Internet presence of businesses today, technology companies have seen this coverage migrate from their general liability policy to being bundled into a media component in a cyber policy (or a separate media liability policy). Coverage here can extend to offline content as well. Network Security: A failure of network security can lead to many different exposures, including a consumer data breach, destruction of data, virus transmission and cyber extortion. The culprits might be looking to shut your network down so you can’t conduct business, either for financial or political gain. Network security coverage can also apply if you’re holding trade secrets or patent applications for a client, and that information is accessed due to a failure of your security. Privacy: Privacy doesn’t have to involve a network security failure. It can be a breach of physical records, such as files tossed in a dumpster, or human errors such as a lost laptop, or sending a file full of customer account information to the wrong email address. Companies have even faced liability from returning a photocopier with a hard drive that contained unwiped customer tax records. A privacy breach can also include an action like wrongful collection of information. AJS Insurance Services works to stay on the cutting edge in providing Cyber Liability Coverage for our clients. Contact us today to undergo an assessment of your potential risks and needs, and we can put together a comprehensive Cyber Liability Coverage package to help keep you and your clients and customers safe.

Errors & Omissions

Even the most careful business owners face Errors & Omissions exposures. That’s because you and your employees don’t have to actually do anything wrong to be accused of mistakes or oversights. E&O Insurance protects you in the event that a customer or client is dissatisfied with your services and decides to sue you. In the event of such a lawsuit, your Errors & Omissions Insurance covers the costs of hiring a lawyer, funding a court defense, and paying any judgments or settlements for which you’re found liable. Because E&O lawsuits can get expensive quickly, this type of insurance is crucial to protecting your business assets.

General Liability

General Liability Insurance is the starting point of coverage for most small-business owners. Regardless of industry, small businesses benefit from the protection provided by a GLI policy. General Liability Insurance protects small businesses against liability related to third-party property damage and bodily injury. In other words, if a non-employee is injured or has their property damaged on your business premises or because of something you or an employee did, your General Liability policy can cover the legal costs, should that party decide to sue.

Hired & Non-Owned Auto Insurance

Hired & Non-Owned Auto Insurance offers protection for liability related to the operation of employee-owned or rented vehicles for business purposes. Often purchased as an endorsement to a GLI policy, HNOA helps cover the costs of accidents or injuries that happen while someone is operating a vehicle not owned by your company for company purposes.

Professional Liability

Professional Liability Insurance shields your business from mistakes or oversights you make in your professional capacity. In other words, if your work or failure to do your work as promised leads to a financial loss on the part of a client, you could be slapped with a Professional Liability lawsuit. Even if the charge proves frivolous, defending yourself in court can be costly because of lawyer’s fees, court fees, docket fees, and more. Your Professional Liability policy covers those costs so you don’t have to dip into your business assets.

Property Insurance

Whether you rely on a single laptop to run your business or you have a factory full of merchandise, chances are good that your business property is essential to maintaining your bottom line. Property Insurance lets you protect that property by providing the funds you need to replace or repair it when a covered event makes it unusable. Most Property policies cover fires, windstorms, theft, and vandalism. If you operate your business in an area that’s prone to floods, earthquakes, or hurricanes, you should consider investing in an event-specific endorsement to cover damage from those events.

Umbrella Liability Coverage

Umbrella Insurance (also sometimes called Excess Liability Insurance) offers a coverage cushion to multiple existing insurance policies (including General Liability, Auto Liability, and Employer’s Liability.) When the cost of a claim to one of these policies exceeds that policy’s limit, Umbrella Insurance kicks in to cover the remainder so the business owner doesn’t have to dip into personal or business assets. Business owners can purchase Umbrella coverage in increments of $1 million for as little as a couple hundred dollars per year