Contractors Errors & Omissions (E&O) Insurance
Every year, I sit down with dozens of contractors to review their policies and any gaps in coverage they may have. Because our specialty lies within the electrical, plumbing, HVAC industries, the majority of my clients are subcontractors on all of their jobs. As a result, many of them don’t feel that they have any professional liability exposure. More so, any professional liability they feel they may have, they believe is covered under their general liability. Today, we’re going to discuss why the latter is not true and why this is a coverage just about every contractor should carry.
What is Contractors Errors & Omissions Insurance?
Think of Contractors Errors and Omissions (E&O) insurance as your safety net against professional mistakes or oversights. It’s designed to provide coverage for claims arising from errors, negligence, or failure to perform professional services. While general liability insurance typically covers bodily injury and property damage, E&O insurance focuses on protecting you from claims related to professional services or advice.
It’s important to note that any exposures relating to your professional liability are almost always excluded from your general liability coverage. Your GL coverage is designed to cover you for any bodily injury or property damage resulting from your work. However, most Professional Liability claims don’t involve either of those things. Yet, someone still has to foot the bill for certain “errors and omissions”.
What Does Errors & Omissions Cover?
Now, let’s break down what Contractors Errors and Omissions insurance typically covers. Before we do, it’s important to understand that not all E&O policies are created equally and you should consult with your agent on your specific coverages. Moving along…
- Professional Negligence: If a client accuses you of making a mistake or failing to meet professional standards, E&O insurance can help cover legal defense costs and any settlements or judgments.
- Errors in Deliverables: If you fail to meet any of your project deliverables, E&O insurance can step in to cover any resulting financial losses or damages claimed by the client.
- Allegations of Breach of Contract: If a client alleges that you breached your contract by not delivering services as promised, E&O insurance can provide coverage for legal expenses and damages.
Contractor-Specific Scenarios
Let’s explore a few scenarios to illustrate how Contractors Errors and Omissions insurance could be invaluable:
- Design Flaws: You’re an HVAC contractor who oversees a project from start to finish, including design. However, a flaw in the design leads to performance issues from the system after completion. E&O insurance can help cover the costs of rectifying the design flaw and any resulting damages claimed by the client.
- Miscommunication: As a contractor, clear communication with clients is crucial. However, a miscommunication about project specifications leads to dissatisfaction on the client’s end. E&O insurance can help cover the costs of addressing the issue and any resulting legal fees or settlements.
- Failure to Meet Industry Standards: Despite your best efforts, a project falls short of industry standards, leading to claims of professional negligence. E&O insurance can provide coverage for legal defense costs and any damages claimed by the client.
Moving Forward
In conclusion, Contractors Errors and Omissions insurance is a vital component of your risk management strategy as a contractor. Regardless of your role in a construction job, odds are that you are undertaking some sort of professional liability. Don’t wait until it’s too late – reach out to us today to learn more about how E&O insurance can protect your business and reputation, allowing you to focus on what you do best: delivering exceptional work to your clients.