Errors and omissions policies are not just the purview of the mega-brokers.

When small agents review their lists of clients, they can recognize many insured business owners and consultants that should have miscellaneous professional liability coverage, also known as miscellaneous errors and omissions or E&O coverage.

Visualize this risk, for example.

A cement contractor was pouring a slab of concrete, which included the piping for all the plumbing for a multi-unit motel. The concrete was poured about one foot off of the target. The contractor had to dig up the slab and pour the concrete again.

Luckily, the contractor's agent convinced the contractor to add a miscellaneous E&O coverage endorsement to his general liability contractor's policy. Therefore, the fix was covered.

Without the added miscellaneous E&O, coverage, the contractor would have been responsible for paying for the repairs since a general liability policy excludes coverage for your own work product.

The insured had to pay a slightly higher premium for the extra coverage, but the coverage paid for itself when the work had to be redone.

AGENTS GET ON BOARD

Agents who do not sell E&O coverage are missing the boat.

Every agent knows that carrying insurance agents E&O is necessary to be in business. How many buy E&O because their carriers require it, or do they understand the valuable protection their E&O policy provides?

Today, Americans are suing first and asking questions later. The burden of proof rests on the shoulders of self-employed business owners and consultants when it comes to these lawsuits, which is why it is so important to have the right insurance coverage.

Many professionals, however, particularly those who are new to consulting, may be unfamiliar with the need to have proper professional liability coverage.

Today, modern business practices, technology advancements and economic factors have broadened the need for professional liability. Many professionals, operating as independent contractors or consultants have joined the job force and have risk exposure. These consultants are generally employed for a short period of time to work on a specific project that requires highly specialized skills.

This new crop of consultants includes Internet designers and programmers, data analysts, title abstractors (individuals who research real estate titles), independent mortgage brokers and financial planners.

For this group, there are many and varied exposures from professional acts, which could give rise to possible claims. These exposures include, but are not limited to:

o Incorrect Web site content (Web designer exposure)

o Incorrectly programmed Web site that results in damage to the owner (programmer exposure)

o Errors made in home title search (title abstractor exposure)

o Giving bad or incorrect financial advice (financial consultant exposure)

o Not disclosing all information associated with a home loan (mortgage broker)

To successfully sell these products, agents need to spend time learning the coverages that are available which are extensive. To gain assistance in education for professional products, there are many resources, including members of the Minneapolis-based Professional Liability Underwriter Society, persons holding the Registered Professional Liability Underwriter (RPLU) designation and, of course, local insurance associations and carriers.

Presently, the professional liability marketplace is a highly competitive and creative segment of the insurance industry.

The standard market is tapping into the miscellaneous E&O market, and in some cases offering lower premiums for this coverage to unsuspecting professionals.

Agents need to be sure to educate insureds on their exposures, coverage details and risks when reducing coverage. If not, agents put themselves at risk for a professional liability claim as well. Agents should not fall into the trap of accepting the “cheapest is best” coverage, but rather look for the broadest form of coverage to meet the needs of their insureds.

Placing professional coverage can be very rewarding and interesting, as many insureds needing the coverage are presently going without it.

It is a definite sales opportunity which will demonstrate an agent's professionalism and in many cases can save the agent from E&O claim of their own.

David Price is executive vice president and chief underwriter officer at Burns & Wilcox in Farmington Hills, Mich. He may be reached at DPrice@burns-wilcox.com

Special Reports /

Errors & Omissions Cover Required For Self-Employed Business, Consultants

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