Errors and Omissions Insurance Texas: Coverage and Requirements

In Texas, errors and omissions insurance is a must-have for professionals who provide advice or services to clients. This type of insurance protects professionals from financial losses due to mistakes or oversights.

The Texas Insurance Code requires professionals to have errors and omissions insurance if they provide services that could cause financial harm to clients.

Professionals who must have errors and omissions insurance in Texas include architects, engineers, and lawyers.

Errors and omissions insurance is a type of protection that safeguards your business in case a client accuses you of making a mistake or failing to do something.

As an expert in your field, you're expected to meet certain standards and best practices, and if a client believes you've fallen short, they could sue your company for financial damages.

This type of insurance is designed to shield you from financial loss even if the claim is unfounded.

Experts in various industries, including professionals like lawyers, doctors, and architects, often rely on errors and omissions insurance to mitigate the risk of lawsuits.

If a client accuses your business of making a mistake or omission, even if it's groundless, errors and omissions insurance can help cover the costs of defending against the claim.

Professionals with specialized knowledge can benefit from E&O insurance's protections. Many Texas professionals who give advice can benefit from E&O insurance, including legal professionals, financial professionals, real estate professionals, construction professionals, and duty-bound professionals.

If you're a contractor or tradesperson who regularly gives customers advice, you might want coverage to protect against damage that results from bad recommendations or misdiagnosed problems. However, E&O insurance typically doesn't protect against errors in physical work.

Businesses that provide a service or offer professional advice can benefit from an E&O policy. Common business types that purchase an E&O policy include insurance agents, real estate agents, architects and engineers, and property managers.

In some industries, like architecture or engineering, your risks may be higher since you may be designing expensive structures or machinery. Clients may require you to carry errors & omissions insurance to provide financial protection if you're named in a lawsuit.

Some professions may require E&O coverage for contracts and certifications. For example, a real estate agent might need to purchase a real estate E&O policy and provide a certificate of insurance before signing on with a broker.

E&O policies cover a broad range of professional mistakes or oversights, including errors such as a real estate agent not disclosing a property's flood zone status.

A real estate agent not disclosing a property's flood zone status can cause unexpected expenses for the new owner, and this is just one example of the types of errors that E&O policies cover.

A paralegal missing a crucial deadline for filing documents can potentially jeopardize the client's case, and this is another example of the types of errors that E&O policies cover.

An investment advisor making a typographical error when entering the client's trade can result in significant losses, and this is a common type of error that E&O policies cover.

An accountant making a mistake on tax documents can incur penalties and interest charges for their client, and E&O policies can help protect against this type of error.

An architect making inaccurate structural calculations can lead to costly delays and modifications in a client's construction project, and this is just one example of the types of errors that E&O policies cover.

The exact incidents that a policy covers depend on the type of professional that the policy is designed to insure, and the particular terms and conditions of the policy.

Claims made policies provide coverage based on when a claim is made, not when the alleged error or omission occurred. This can be particularly useful in instances where the exact timing of an incident is difficult to ascertain.

Retroactive dates are often included in claims made policies, representing the earliest date an incident could have occurred for a claim to be covered. If the incident happened before this date, the claim might not be covered.

Tail coverage extends the period during which claims can be filed after the policy's end date. This can provide additional protection and peace of mind for professionals.

Some E&O policies cover additional risks common to businesses in many occupations, such as employment practices liability insurance. This type of insurance covers claims against businesses that result from workplace violations like discrimination and wrongful termination.

Here are some key things to know about claims made policies:

It's essential to carefully review your E&O policy to understand the coverage limits and costs. This will help you make informed decisions about your insurance needs.

Claims made coverage is a type of insurance policy that provides protection based on when a claim is made, not when the alleged error or omission occurred. This is particularly useful in instances where the exact timing of an incident is difficult to ascertain.

A claims made policy typically includes a retroactive date, which represents the earliest date an incident could have occurred for a claim to be covered by the policy. If the incident happened before this date, the claim might not be covered.

To assess the coverage period of a claims made policy, professionals should pay close attention to the retroactive date and tail coverage. Tail coverage extends the period during which claims can be filed after the policy's end date.

Here are some key things to know about claims made coverage:

Claims made policies are often less expensive than occurrence policies, which cover claims arising from incidents that occur during the policy term, no matter when the claim is filed. However, claims made policies may not cover claims filed against your business after your policy expires.

Your errors and omissions insurance can cover costs to defend your business even in cases of false accusations.

Litigation costs associated with E&O insurance claims may be covered even in the case of false accusations.

Business disagreements can escalate into legal actions, and your errors and omissions coverage can help you pay for related expenses until you reach your policy limit.

For example, if there is a fire in an apartment building, a tenant could file a professional negligence lawsuit that claims the property manager did not properly inspect smoke detectors.

Some common areas where errors and omissions insurance can provide coverage for defense costs include:

If you're sued for $50,000, your E&O policy might pay for damages or settlements arising from those claims, as well as attorneys’ fees, court costs, and other legal expenses.

E&O insurance has its limitations, and it's essential to understand what's not covered under the policy. Bodily injury or property damage is not covered, so if a client suffers physical harm or their property is damaged due to your business's actions, you'll need a separate policy to cover these costs.

Employment-related acts, such as wrongful termination and discrimination, are also excluded from E&O insurance. This means that if an employee sues your business for unfair treatment, you won't be able to rely on your E&O policy to cover the costs.

Fraud or criminal acts are another area where E&O insurance won't provide coverage. If your business is accused of engaging in fraudulent activities, you'll need to look to other forms of insurance or legal protection.

Injuries to workers are covered by workers' compensation policies, not E&O insurance. This includes medical expenses and lost wages due to work-related accidents.

Infringement of patents or other intellectual property violations are also not covered by E&O insurance. If your business is accused of stealing or infringing on someone else's intellectual property, you'll need a separate policy to cover these costs.

Data breaches and theft of sensitive data are not covered by E&O insurance. If your business is hacked or sensitive information is stolen, you'll need to look to other forms of insurance or cybersecurity protection.

Here are some specific examples of what's not covered by E&O insurance:

E&O insurance in Texas is a trade-off between cost and coverage. Policies that offer more coverage typically cost more, so it's essential to compare policies carefully.

The cost of E&O insurance starts at $19 a month, but can vary based on your coverage needs, exposure to risk, and claims history. Businesses with more exposure to risk typically pay higher rates.

Policies with higher deductibles usually charge lower premiums, but you'll need to pay more out of pocket before the insurance kicks in. Some insurers offer occurrence policies, which provide broader coverage, but are more expensive than claims-made policies.

Here are some key factors that affect the cost of E&O insurance:

Errors and omissions insurance is a claims-made policy, meaning it covers claims made against your business during the term of the policy.

The policy deductible is the amount you must pay out of pocket first before the insurance kicks in, and policies with a higher deductible usually charge a lower premium.

Most E&O policies offer coverage for attorneys' fees and other legal expenses in addition to the policy limit.

Some insurers offer E&O insurance on occurrence policies, which cover claims arising from incidents that occur during the policy term, no matter when the claim is filed.

The cost of your errors and omissions insurance monthly premium is determined by several factors, including your exposure to risk, claims and insurance history, and coverage limits and insurance package.

Having a history of insurance claims, canceling your policies early, and other related factors can lead to higher business insurance rates.

You can save 10% on insurance costs by bundling your E&O coverage with another policy, such as general liability, workers' compensation or commercial auto insurance.

E&O insurance typically starts at $19 a month, but can vary based on your coverage needs, exposure to risk, and claims history.

biBERK's E&O insurance policies start around $300 and can go up into the thousands, depending on your specific industry, policy limits, and other factors.

Here are some common scenarios that E&O insurance covers:

In some industries, errors and omissions insurance is referred to as professional liability insurance. For example, accountants, lawyers, architects, and engineers often use this term.

The main difference between errors and omissions insurance and professional liability insurance is the name. It's a matter of semantics, as both types of coverage provide financial protection against claims of professional negligence.

Professions that call it professional liability insurance may have different requirements for carrying this type of coverage. For instance, in an industry like architecture or engineering, clients may require professionals to carry professional liability insurance due to the high risks involved.

Ultimately, whether you call it errors and omissions insurance or professional liability insurance, the coverage and protection it offers remain the same.

Here's a comparison of the two terms: