Errors and Omissions Insurance in Texas

What is errors and omissions insurance? 

Professionals who give clients advice need to give sound advice, or else they might be held liable for errant guidance that’s provided. To help protect Texas professionals against this risk, there’s errors and omissions insurance.

Errors and omissions insurance provides specialized coverage for professionals when giving advice. Policies typically cover court fees, attorney fees and settlements for covered claims.

What Texas professionals should have E&O insurance? 

Most Texas professionals in who mainly offer advice should consider the benefits that E&O insurance provides. Few could afford the potential costs of a major claim arising from errant guidance. For example, these policies are often purchased by:

• Legal professionals, including attorneys, mediators and paralegals
• Financial professionals, including financial advisors and counselors
• Tax professionals, including certified public accountants and tax preparers
• College consultants, including those helping with admissions and scholarships
• Real estate professionals, including brokers and agents
• Other fiduciaries, including trustees, guardians and conservators

In select situations, contractors also could find E&O insurance beneficial. Policies won’t protect against all work-related risks, but might insure against mistakes made when giving advice.

What scenarios are covered by E&O insurance?

E&O policies can be versatile, frequently offering coverages that can be customized to the fields listed above. Depending on the industry and policy, scenarios like the following might be covered:

• Real estate professional fails to inform a buyer of zoning restrictions, and the buyer thusly can’t use the property as intended
• Legal professional sends a client’s file to the opposing counsel, thusly jeopardizing their client’s case
• Financial professional enters a decimal point incorrectly when executing a client’s order, thusly resulting in a loss for the client’s portfolio
• Tax professional mistypes enters a figure in the wrong line on a client’s return, thusly causing the client to incur penalties and interest that must be paid later
• Media consultant forgets to check that a campaign meets all regulatory requirements, thusly causing the client to pay fines

What does “claims made” signify in an E&O policy? 

E&O policies often structured as “claims made,” which generally means they prioritize the the time a claim is filed when determining eligibility. This is opposed to when the incident in question actually occurred.

A claims made policy will usually cover eligible claims that are filed during the policy’s period. This is generally true even if the incident in question occurred before the policy was purchased.

E&O policies are frequently claims made, because it can be difficult to determine exactly when the errant advice was given. 

What does “retroactive date” and “tail coverage” signify in an E&O policy?

There are some additional terms that professionals should pay attention to, however, as they can affect what claims are eligible. 

The “retroactive date” is normally the earliest date an incident can have occurred and still be covered by the policy, even if a claim is filed during the eligible period. 

“Tail coverage” normally extends the time to file a claim  beyond a policy’s period, which can be helpful for covering mistakes that were made during the policy period but not known at the time.

How much do professionals pay for E&O coverage?

The cost of E&O coverage varies, being affected by a professional’s industry, scope of services, experience, past claims history, and other factors. In general, however, this insurance can be quite affordable.

An independent agent can check quotes from several insurance companies, so professionals know exactly how much each company would charge them for coverage.