Errors and Omissions Insurance in Texas

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Professional Liability E & O Insurance

Texas Errors and Omissions (E&O) Insurance

 

What is it?

Errors and Omissions Insurance, or (E&O) coverage is a kind of liability insurance.  Sometimes the term is used interchangeably with “professional liability insurance” or “professional malpractice insurance”, but there are some subtle differences.  However, they all differ significantly from Commercial General Liability insurance, with which they are sometimes confused.

E&0 insurance might be thought of as an “umbrella” form of liability insurance under which  professional liability and professional malpractice insurance fit.  To clarify, the term “umbrella”, is not being used to suggest that it is excess insurance. Instead, E&O is the broader category and professional liability and malpractice insurance are the more narrow categories.  By way of example, E&O insurance may be available for the following categories of professions or occupations:

            --architects

            --brokers and agents of various sorts

            --consultants

            --medical testing facilities

            --real estate appraisers

            --financial advisors

In contrast, professional liability or professional malpractice insurance are the terms generally used when medical, legal and some other kinds of professionals are the insured.

The foregoing listing is by no means an exhaustive list of the kinds of people or entities who or that may have the need for E&O insurance. It is often sought by people engaged in professions and various types of technical work, in which an errors or omissions mistake made by them could cause financial damage to another.  The common denominator is that persons interested in E&O insurance generally provide advice, services, or counsel.

Coverage under an E&O policy may also extend to those working for those persons if the underwriting guidelines of the insurer allow it. Further, employees or assistants could be covered under the legal doctrine of respondeat superior.   This doctrine places liability upon an employer for the negligent act or omission of an employee who is working within the course and scope of his/her employment.  Examples of those employees include paraprofessionals or “quasi-professionals”.

COVERAGE TRIGGERS UNDER AN E&O INSURANCE POLICY

The protection of the Errors and Omissions Insurance or E&O policy can be triggered when, by the unintentional wrongful act of the insured, a client or a customer is financially damaged.  Usually, this means an injury that can be translated into economic terms (i.e. money or a money equivalent, such as lost opportunity to earn money). As is the case with any liability insurance, wrongful acts committed intentionally are not usually covered. That is because liability insurance applies to fortuitous  (accidental) occurrences, not ones that are purposely done.

HOW IT WORKS AND WHAT IT DOES

If an insured makes a mistake in the work that he/she/it was hired to do and that mistake  causes financial harm to another, the insured bears a potential liability to the injured party.  Specifically, the insured could be held financially responsibility for the foreseeable damages that the insured sustained.  The mistake could be in doing something that the insured should not have done, or in not doing something that it should have done. The basis of responsibility may be asserted in terms of negligence, breach of contract, or both.

ELEMENTS OF NEGLIGENCE 

Negligence is usually defined as the failure to act in a way, or attain a standard of care, that a hypothetical “reasonable person” would act or attain under similar circumstances.

The “reasonable person” is not a real person. Instead, it is a theoretical one (a “legal fiction”) who has essentially the same experience and training as the insured does. The “reasonable person” analysis tries, to the extent possible, to compare “apples to apples”, and may even take into account the standard of care that prevails in the geographic area where the loss occurred.

If a negligence claim arises, a lawsuit filed, and if it goes to trial, the Plaintiff (the person claiming to have sustained financial damage) will have to present evidence that the Defendant (the person being sued for financial damages) did not reach the required standard of care. One of the ways that that is routinely done is by having an “expert witness” testify. That person is used to try to establish the required standard of care and to show that the Defendant did not reach it. The Defendant will usually also have an expert witness to try to show that the performance of the Defendant did meet the standard of care and was not negligent. That is why negligence lawsuits often become battles of experts. It is also why negligence lawsuits get very expensive.

In addition to proving negligence, the Plaintiff has to prove that the damages being claimed were the “proximate consequence” of the negligent act, (an Error or Omission). This means that were it not for the negligence, the damages would not have occurred—that the negligent act was the direct cause of the damages and that there were no intervening causes.

“Breach of contract”, in this context, means that a promise was made to perform a certain task or set of tasks, or to render advice or counsel, but failed to do so in some material way. The other party must be able to prove that he/she/it sustained measurable damages as a result of  the breach.

BENEFITS OF E&O INSURANCE

There are numerous benefits to you and to your business of E&O insurance. Some of them include: 

1. The insurance company investigates the claim at its own expense. This involves an adjuster taking statements, assessing that which the insured did or did not do in the course and scope of the work, evaluating whether or not a requisite standard of care was met or was not met, determining whether there may be comparative or contributory negligence on behalf of the claimant, and evaluating claimed damages. It is very important that the insured cooperate fully with the insurer in this process; it is a requirement of Errors and Omissions Insurance coverage under the policy terms. 

2. If the insurer determines that there may be negligence or breach of the contract to perform services, and that damages resulted from errors or omissions, it will attempt to settle the claim upon the best possible terms of your errors and omissions insurance policy without risking a lawsuit. This may or may not be possible. The insurer has an obligation to you to settle within policy limits if that can be done. Sometimes the policy provides that the insured has to approve a settlement. Some policies also provide that the insured has to contribute a certain amount to the payment of the claim; this is similar to a deductible. 

3. If the claim cannot be settled and you get sued, the insurer has an obligation to defend you. In general, this involves hiring and paying a lawyer to represent you in the lawsuit. It is critical that you cooperate and work with the attorney in the defense, attend depositions, and otherwise comply with all directives. The failure to do so can jeopardize your defense and coverage under the policy. 

4. If you are found to have committed the wrongful act alleged by the Plaintiff, and barring any coverage defenses, the insured is obliged to pay on your behalf the damages found to be due. Under ordinary circumstances, that amount is limited to the dollar limits of the policy. The insured should be aware that some policies provide for “burning limits”. This essentially means that the amount spent by the insured in investigating and defending a claim counts against and therefore, depletes the amount of money available for indemnity. If such a policy provision exists it may have a bearing on the insured’s willingness to settle the case rather than to be exposed to a personal exposure to financial damages. 

All E&O Insurance Markets that your request are matched with have been prequalified and Rated as B+ or A. Most providers you will find to be A+ Rated Underwriters or Agent Brokers of A Rated Underwriters. The Minimum Company Rating currently accepted is B+. Many Personal Lines quotes do not require credit scoring though some markets will decline to quote without it. Most all Commercial lines will require Business or Guarantor Credit Scoring.

How do we do it? We use our experience and expertise in the E & O insurance market with Respected Insurers to compete for your business. You can Submit your coverage need for a quote online. Have your request professionally compared and matched to multiple insurance coverage providers for the best rate. Buy the policy that's right for your coverage need. Get your insurance quote online or by talking directly with us.

Liability Insurance in broad terms is coverage that can provide protection for certain actions or inactions of the named insured that may result in a financial liability. Direct or indirect losses can arise for which an insured might be held financially liable.

Whatever Profession your in, We offer Errors and Omissions Insurance in Texas. E & O Liability Insurance Coverage for all types of Businesses and Professions. Whether you need Professional Liability Insurance, Commercial zone Building coverage, Business Properties, Equipment, Inventory or even your Company Vehicles, we offer insurance products designed especially for the protection of your business interests.

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Contact us today for more information about Errors and Omissions Insurance "E and O insurance" in Texas.