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 Errors and
omissions
By Josh Ring and Tina Green
EL DORADO INSURANCE
To understand the importance of errors and omissions and the ramifications associated with the absence of this coverage, it is necessary to understand the meaning of “errors” and “omissions” and how they pertain to your business. Let me then start by providing you with a very clear definition.
Errors and Omissions is an insurance form that protects you against liability for committing an error or omission in the performance of your professional duties. Generally, these policies are designed to protect you against financial losses rather than liability for bodily injury or property damage.
An error, quite simply, is a mistake. For instance, intending to complete a task, but failing to follow through.
An omission is the failure to perform. For instance, you didn’t perform a task that should have been completed; any process where tasks are left out, neglected or left undone.
Errors and omissions addresses claims based on “failure to” allegations. “Failure to” means claims that arise from failure to do something that you should have done, failure to train, failure to perform, etc. Very few people intentionally do tasks incorrectly. They may have no idea that their performance is lacking or that they are acting inappropriately. There are many reasons why individuals may be performing tasks incorrectly. Lack of training could play a very big role in this type of failure. The most common reasons for lack of training are lack of time, lack of resources and lack of motivation.
There are many people who require a more structured environment in order to perform at their peak. Written procedures or standards of performance guidelines can be a helpful tool. Without written procedures, employees tend to act on their own best judgment. While their judgment may be sound most of the time, the problem is that each person tends to develop their own system.
Even if there are procedures in place, they may not be adhered to by all personnel. Methods and procedures must be applied consistently in order to minimize the chances of errors. An increasing rationale to these types of errors is lack of time. We seem to have no time to complete tasks correctly. We are all pressured to get more done, in less time and with fewer people. We must all remember that haste leads to mistakes. Procedures can create the tools needed to best use our time and eliminate the costly mistakes that lead to E & O losses.
We can reduce the risk of E & O losses by identifying
exposures, analyzing and measuring those exposures, and then deciding on an appropriate course of action and implementing that course. Implementation is key. If we merely focus on identification without making the changes needed, we will be doomed to repeat our past mistakes. As the E & O climate worsens, doing nothing can prove fatal to your company.
In order to minimize E & O loss exposures and still operate at a high level of performance, one must achieve a balance between concern for losses and satisfying the needs of your clients. This can be achieved by creating procedures for E & O loss prevention. This will help to ease your concerns while you continue to grow and increase your customer satisfaction levels. Failure to achieve this balance could result in increasing costs for professional liability through increased claims activity. Customer service efforts may also suffer due to fears of potential E & O losses.
It is important to note that this coverage, like most other coverages, has exclusions associated with it. A sample of some of the exclusions that might pertain to your business are briefly described below:
The coverage shall not apply to damages arising out of:
a. Infringement of copyright, title, slogan, patent, trademark, trade name, service mark or service name
b. Violation of federal or state anti-trust laws or any regulations and rules thereunder
c. Any liability imposed solely by any governmental statute or regulation
d. The conduct of any business enterprise not listed in your application for this policy
e. Harassment, misconduct or acts of discrimination because of race, creed, color, national origin, religion, age, sex, sexual preference or handicap including, but not limited to, violation of any statute, law, ordinance or regulation prohibiting such acts
f. Breach of contract or break of any express or implied warranty or guarantee
g. Demands for injunctive relief or for punitive or exemplary damages
h. Willful violation of a penal statute or ordinance committed by or with the consent of the insured
i. Employment or personnel practices or injuries to any present or former officer or employee of the insured.
The insuring agreement stipulates that the insurance company will pay those sums you, the insured, become legally obligated to pay as damages resulting from errors or omissions in the practices of your business. The insurance company has the right and duty to defend any suit seeking those damages. They may, at their discretion, investigate any “occurrence” and settle any claim or suit that may result.
In the event of an occurrence, claim, offense or suit, you have specific duties. You must immediately record the specifics of the incident and the date the suit is brought against you. You must notify your insurance carrier immediately and send copies of any demands, notices, summonses or legal papers received in connection with the claim or suit. You must cooperate with your insurance carrier and authorize them to obtain records and other information on your behalf. You must not make any payments, arrangement for payments or assume any obligation without first consulting with the insurance carrier.
This should help you clearly see that the need for errors and omissions insurance is important and vital to you and your business.
El Dorado has been an ASSIST vendor member for more than 15 years. During that time, we have very proudly supported this association and the efforts of its membership.
This year, we are once again very pleased to be a “Platinum Sponsor” for the convention in Houston and, as always, sponsor the President’s Gala. El Dorado would like to invite within the security profession to attend the Presidential Gala and Murder Mystery Dinner Friday, Oct. 3.
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