Errors and Omissions Claims Examples in Professional Liability

Errors and omissions claims can be costly and damaging to professionals, and understanding the types of claims that can arise is crucial for mitigating risk.

A common example of an errors and omissions claim is a lawsuit against a financial advisor who failed to diversify a client's portfolio, resulting in significant losses.

This type of claim can be devastating for professionals, and it's essential to have the right insurance coverage in place to protect against such risks.

In the case of a software engineer who failed to include a critical security patch in a new release, the resulting data breach led to a costly errors and omissions claim.

Professional negligence can lead to errors and omissions claims, as seen in the example of a doctor leaving a surgical instrument inside a patient.

These claims often involve a breach of duty of care, which can result in significant financial losses for individuals or businesses.

A recent case study highlighted the importance of proper documentation in preventing E&O claims, where a lack of clear records led to a lengthy and costly dispute.

In many cases, errors and omissions claims arise from a combination of human error and system failures, making it essential to have robust processes in place to mitigate risks.

The consequences of E&O claims can be severe, including reputational damage and financial ruin, as demonstrated by the example of a company facing a multimillion-dollar lawsuit due to a series of avoidable mistakes.

As we explore common claims issues, it's essential to understand the five most frequent claims that arise.

Claimants often argue that their injuries are more severe than they appear, citing examples like a 35-year-old man who suffered a seemingly minor back injury but later developed chronic pain.

The second most common claim is for emotional distress, which can be a legitimate concern, as seen in the case of a woman who experienced anxiety and depression after witnessing a traumatic event.

In some cases, claimants may try to exaggerate their losses, such as a business owner who claimed $100,000 in lost profits due to a minor property damage.

The fourth most common claim is for medical expenses, which can be a significant burden, as illustrated by the example of a family who accumulated $50,000 in medical bills after a car accident.

Lastly, claimants may dispute the settlement amount, arguing that it's too low, as seen in the case of a couple who felt their $20,000 settlement was insufficient for their injuries.

Professional liability insurance is a type of coverage that's often used interchangeably with errors and omissions insurance.

These terms refer to the same type of coverage, which is designed to protect professionals from claims of negligence or errors in their work.

This type of insurance can include extra coverage for things like reputation, repair costs, travel costs, and subpoena coverage.

Contractors and professionals should be careful to review the entire policy to ensure it includes the services they need.

E&O insurance and professional liability insurance are typically used interchangeably, and are also sometimes called professional indemnity insurance.

In the construction industry, these terms are often used to refer to the same type of coverage, and the terms are used interchangeably.

General liability insurance, on the other hand, provides broad coverage for injury and property damage caused by your business, whereas errors and omissions insurance is specific to errors in providing professional services.

Policy coverage is a critical aspect of insurance, and agents must get it right to avoid errors and omissions claims. Failure to advise adequate coverage can lead to clients facing unexpected expenses.

If an agent overlooks a potential problem and provides poor risk analysis, the client may not be prepared for a scenario that requires specific coverage. This can result in the client holding the agent responsible for the financial burden.

Incorrect explanation of coverage can also lead to issues. Agents must ensure clients fully understand what they are paying for, as poorly explaining a coverage level can result in clients not having the coverage they thought they had when filing a claim.

To prevent this scenario, agents should ask clients if they have any questions and record emails and calls between them (with the client's consent) to establish the agent accurately represented the coverage.

Administrative errors can have serious consequences for both clients and insurance agents. These mistakes can occur when multiple agents work with the same client, leading to breaks in communication and errors.

Incorrect information on certificates of insurance is a common issue, resulting in reduced, canceled, or invalid coverage. This can leave clients without the protection they need when they need it most.

To minimize the risk of administrative errors, it's essential to limit the number of agents working with each client. This reduces the likelihood of mistakes and ensures that communication is streamlined.

Policy term misrepresentation can be a serious issue for both clients and insurance agents. It occurs when an agent misrepresents the terms and conditions of a policy, leading to a client feeling deceived.

To avoid this, agents need to develop and maintain expertise in every product or service they recommend. This means staying current with changes to policy terms and conditions over time.

Careful and thorough explanations of new product or service offerings are crucial when consulting with a client. This ensures there is a clear understanding of what is covered, as well as the terms and conditions, fees, and expenses associated with it.

Agents should refrain from distorting the truth about a product or service to secure a sale, as this can lead to misrepresentation claims. Maintaining honesty and integrity is of utmost importance.

Recording emails and calls between the agent and client can help establish that the agent accurately represented the coverage. This can be done with the client's consent, and it's a good practice to ask the client if they have any questions about the policy.

A fiduciary breach can be a serious issue for financial advisors and insurance agents. This occurs when they fail to act in their clients' best interests.

As a fiduciary, you're legally and ethically bound to act in your clients' best interests. This means considering their planned retirement age, risk tolerance, and financial goals before making any recommendations.

Failing to conduct thorough research and analysis on investment risks and returns can lead to a breach of fiduciary duty. This was the case in a scenario where a client claimed their advisor recommended a variable annuity fund that didn't align with their risk tolerance and financial goals.

Incorrectly representing what protection a given coverage level affords a client can also lead to a breach of fiduciary duty. This can result in clients not having the coverage they thought they had when filing a claim.

In one scenario, an insurance agent incorrectly represented the coverage level to a client, leading to a claim being denied. This highlights the importance of accurately explaining coverage levels to clients.

As an insurance agent, it's crucial to ensure the client fully understands what they're paying for. This can be done by asking the client if they have any questions and recording emails and calls between you (with the client's consent).

Administrative errors can be a real challenge for insurance agents. They can occur when multiple agents work with the same client, leading to breaks in communication and errors on certificates of insurance.

To minimize the risk of administrative errors, it's essential to have fewer agents working with the same client. This can help reduce the likelihood of errors occurring.

Administrative errors can result in reduced, canceled, or invalid coverage, which can lead to professional liability lawsuits against the agent. This can be a costly and time-consuming process for both the agent and the client.

Here are some common administrative errors that can occur:

To prevent these errors from happening, agents should double-check their information with the client and ensure that everything is accurate and up-to-date.

Administrative errors can be costly for clients, and one of the most common mistakes is failure to send client information to potential insurers. This can lead to incorrect information being used to issue a policy, which can be voided when a claim is filed.

If an agent is the link between client and insurer, incorrect information can be their fault. This can result in the client being without the protection they thought they had when they need it most.

Agents should double-check the information they provide to potential insurers, just like they should double-check information with clients. This includes making sure all details are accurate and complete.

Incorrect information can be a serious issue, and clients may sue agents for their negligence and financial burden. This is a risk that agents can mitigate by being meticulous with the information they send to insurers.

Protecting Agents Through E&O Insurance is crucial, as mistakes can have serious consequences for clients and agents alike.

Even with careful review processes, the potential for a slip-up is always present, which is why E&O insurance is a must-have for insurance agents.

E&O insurance helps prevent mistakes by mandating agents set up systems to avoid errors, and provides the legal assistance and fees an agent might need in a lawsuit.

Having the right protection in place gives insurance agents the peace of mind to focus on their clients' needs, not worrying about potential lawsuits.

We at ProWriters have been innovators in helping people and companies find the best E&O insurance since 2008, streamlining the process to help agents find their best insurance options more quickly.

Cyber & Privacy Liability Insurance and other types of insurance may also be necessary, but E&O insurance is specifically designed to protect agents from honest mistakes.

Risk Assessment is a critical component of any professional service, including insurance and financial advising. It's essential to thoroughly assess and evaluate clients and their specific circumstances prior to recommending insurance products or services.

Proper risk assessment involves maintaining accurate records of all client transactions, communications, and processes. This includes keeping copies of emails, text messages, and social media interactions.

Documentation of client conversations, including phone calls, video conferencing, and in-person meetings, should be done as soon as possible following the discussion. Dates, times, details of conversations, policy updates, and any other relevant information should be included.

Failing to properly assess client risk can lead to significant challenges in substantiating claims, as seen in the example of the denied whole life insurance claim. Accurate documentation of a client's medical history, lifestyle habits, and other relevant information is crucial for informing underwriting decisions and ensuring that the policy aligns with the client's needs and expectations.

Recording conversations and saving the file within the client's records can also be beneficial, but only with the client's agreement. This can provide an additional layer of protection and support in the event of a dispute or claim.