Don’t Let One Mistake Kill Your Business

Errors and omissions insurance can help protect your business against the costs of customer lawsuits – even those not justified

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Nobody’s perfect. Even a business with the best employees and solid business practices can make mistakes. If you’re a business owner, you can’t be everywhere. In addition, chances are you will work with subcontractors, and no matter how carefully you select them, you have less control over their ability to avoid mistakes than you do within your own company.

Not only that, we live in a lawsuit-happy society. Even if your company has correctly designed or inspected a septic system, that doesn’t mean a customer won’t sue you if they think their problems are the result of your actions. Sometimes they’ll sue even if they know you weren’t the cause of their problem.

 

What is E&O?

For all these reasons, business owners in the onsite industry who provide professional design or inspection services should carry errors and omissions insurance (E&O). Even one lawsuit from a client can damage your firm’s reputation and place a tremendous financial strain on you. Even frivolous lawsuits mean long and costly litigation, whether or not you prevail.

A solid E&O policy can give you the security you need to come out on the positive side of a bad situation. E&O covers your company in case a client holds you responsible for a service you provided (such as a septic system design or inspection) that did not have the expected or promised results.

It is similar in many ways to malpractice insurance for doctors. Most E&O policies cover judgments, settlements and legal defense costs, and typically cover both salaried and hourly employees, as well as subcontractors working on your behalf.

 

Beyond general liability

It is important to note that mistakes made while providing engineering, design or inspection-related services are considered professional liability risks and are not covered by your commercial general liability policy.

Not having E&O coverage can mean your company is taking a huge financial risk. Even if you are not at fault, litigation is both time-consuming and expensive. In addition, more potential clients – especially larger organizations – are requiring E&O coverage in their RFPs.

A range of E&O policies are available at a variety of price points. Many designers, engineers and inspectors in the onsite industry have looked at E&O coverage and have decided against buying it – often because the cost seems prohibitive.

That’s understandable. Unless your insurance agent is well versed in the specific risks faced by professionals in our industry, the type of coverage they offer may be more geared to general contractors. In that case, the E&O coverage is likely pricing in risks you will never face. For example, if you don’t build homes, you don’t need to protect yourself against poorly sited foundations, unstable roofs and the like.

 

Your E&O source

NOWRA has recently endorsed E&O coverage offered through Alteris. Included as part of the company’s SeptiCover insurance program, this policy is specifically designed for the risks faced by onsite system designers and inspectors. It is a stand-alone policy: You don’t need to buy it in conjunction with any other insurance, and it is reasonably priced. The annual premium for $250,000 coverage is $750; for $1 million coverage, the premium is $1,250.

As with any product or service you buy, it makes sense to perform due diligence and compare policies and coverages before making a decision. What works for your competitor down the street may or may not work for you.

E&O protection ought to be part of many contractors’ coverages. You have a lot on the line each time your company is on the job providing valuable services, and E&O can protect you if an “Oh no!” moment occurs. It can be a selling point for your business, giving your clients peace of mind, knowing they will be compensated if there is an error or omission.



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