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If your small business provides technology-related services such as software development, web design or graphic design, you’re vulnerable to potential lawsuits from your clients. If you’re found responsible for errors or omissions in your work that resulted in a loss to your client, they can file a suit against your small business. Having technical errors and omissions (E&O) liability coverage built into your policy can help mitigate costs associated with these types of lawsuits.
Lawsuits are not only costly and time consuming, they can also have a negative impact on your relationship with your current clients and your reputation with potential customers. E&O coverage is also known as professional liability insurance and malpractice insurance when referring to medical professionals.
Technical E&O insurance is designed to help professionals protect themselves in today’s litigation-conscious world.
Do I need technical E&O insurance?
One of the benefits of having proper insurance coverage is peace of mind. The truth is, mistakes can and do happen. If you’re in the business of providing any type of service to your clients in exchange for a fee, you’re vulnerable to E&O risks. Knowing that you’re covered in the event of an error or omission in your work will help keep your mind at ease so you can focus on your business.
Here are some examples of scenarios where technical E&O insurance would come in handy:
- When you’re late for a very important date. If your business fails to provide services in a timely fashion or as outlined in a client contract, and the delay causes financial loss to the client, your technical E&O coverage can help with these costs and get you back to work quickly.
- When your client points their finger at you. If a client claims that your work resulted in damages that led to direct economic losses, you could face a lawsuit for the costs associated with those losses.
- When the devil’s in the details. We trust that you’re very careful and thorough in your work, but every once in a while something might slip through the cracks. If you overlook an important detail that results in your client not receiving the agreed upon service, your technical E&O coverage is designed to protect you from the costs that may result from the situation.
- When you’re on the stand. If you’re found legally liable for negligence in the service you’ve provided to a client, you could face a long and costly lawsuit. Your technical E&O coverage can help with the legal costs you may face and help you get back to work quickly to keep your loss of income low.
Small business types that require this type of coverage include:
- Graphic designers
- Web designers
- IT Consultants
- Hair & beauty salons
- Management consultants
Tips to avoid E&O issues:
There are a few things you can do as a small business owner to help avoid a lawsuit as a result of an error or omission in your work, including:
- Stay organized! Keeping your files, contracts and other paperwork organized and easy to navigate can help you avoid any errors or mistakes. It’s always important to have a written and signed contract that spells out exactly what is and isn’t expected of you from your clients. It should have concrete deadlines and fees outlined as well.
- Keep the communication flowing. While you’re working on a project or service for clients, make sure you’re consistently and clearly communicating with them about the status of the job. This helps keep their expectations more realistic.
- Have the proper steps in place to avoid disaster. Having proper quality control policies and procedures in place for your small business can be a big help in avoiding errors or omissions that result in a lawsuit. Doing regular follow-ups and audits with clients is also a best practice.
Other coverage options to consider:
Commercial general liability insurance: Commercial general liability (CGL) insurance is designed to protect you and your business from a loss if you’re found legally liable for bodily injuries or property damage to a third party caused by the product you sell or the service you provide. CGL insurance can also offer protection in situations where you or your employees are conducting business offsite.
Product liability insurance: Product liability insurance is often included in a CGL policy, but not always. It’s important to double check that your small business insurance policy does protect you from risks associated with product liability claims.
Cyber risk and data breach coverage: Cyber attacks are an ongoing threat to small businesses and have continued to rise recently. Cyber event expense coverage is designed to help small businesses that rely on technology mitigate some of the expenses that may incur as a result of a cyber hack.
Property insurance: As a small business owner, you likely rely on your property, tools, equipment and technology to help keep your business running. If one of those key pieces of the puzzle was damaged and needed repair, you may not be able to continue operations. This is when you need property insurance coverage.
Equipment breakdown insurance: Your equipment is covered in your property insurance policy for damage caused by external sources, such as fire, floods and weather damage; however, you may not be covered for electrical or mechanical damage. In these situations, you’d look to your equipment breakdown insurance.
Commercial auto insurance: If you or your employees use your vehicle for business purposes you need commercial auto insurance to protect that vehicle in ways your personal auto policy may not be able to.