If you have never had an errors and omission policy, or if you have never had a claim brought against you, you may have a few misconceptions regarding coverage. This is understandable, as there is a lot of confusion surrounding E&O coverage. Below are some of the most common misconceptions regarding this type of insurance:
Myth: E&O Coverage is Automatically Available in the Event of a Client’s Uncovered Loss
Reality: E&O coverage is a liability policy, which means that if, after an investigation, your provider determines that you were not liable, you could be denied coverage. For this reason, you always want to report incidences to your carrier so that they can thoroughly investigate the validity of a claim.
Myth: You Can Pay for a Loss and Your Provider Will Reimburse You
Reality: Like with all insurance policies, if you don’t follow procedural steps when filing a claim, you sacrifice your opportunity to file a claim at all. When hit with an E&O lawsuit, follow the exact guidelines spelled out in your errors and omission policy. This may include reporting the incident as soon as possible, cooperating in the defense and not assuming any financial or legal obligation.
Myth: You Can Work With Your Own Attorney to Handle a Claim
Reality: While it is true that you can hire your own attorney, if you do, you would be doing so at your own risk. Your E&O provider’s attorney is familiar with these types of claims and understands what defenses do and do not work. If a claim is brought against you, use their lawyer, as that’s what you’re paying for.