Professional Liability (also referred to as Errors & Omissions liability) covers errors and omissions for a variety of professional service providers. Professional liability insurance provides coverage for negligence in the performance of services where a reasonable standard of care is expected of the service provider i.e., accountants, consultants, financial advisors, engineers, attorneys, and other professionals. Common claims allege negligence, misrepresentation, design errors, failure to act and deal in good faith, inaccurate advice and so on.
Every day as you engage in normal business activities you create exposures to costly liability claims, often times unknowingly. Companies that elect to self-insure their professional liability exposure often believe they are too small to need it or that it’s too expensive. Others mistakenly assume that professional liability is covered somewhere in their regular business policy(s). In today's complex and litigious environment, self-insurance and wrong assumptions can be a financially devastating mistake. You’ve worked too hard and sacrificed so much to build a successful business. Don’t let the actions of others put your business at financial risk.
A franchisor was sued after the purchaser of three franchise locations failed to make revenues that exceeded its operating costs. The plaintiff (franchisee) asserted the prospectus provided by the franchisor contained incomplete and inaccurate representations. The plaintiff demanded the franchise company (franchisor) rescind the agreement; return all purchase amounts as well as all lost revenue and attorney’s fees. The insurance carrier paid approximately $800,000 in costs.
The claimant alleged that her financial advisor recommended that she use the proceeds from her husband’s life policy to purchase shares of class A mutual funds on margin, resulting in a $40,000 margin call. The claimant asserted that the financial advisor failed to inform her of the ramifications of maintaining a margin account. The financial advisor also recommended a portfolio concentrated in aggressive growth mutual funds, which she claimed were unsuitable based on her lack of investment knowledge and desire for a conservative investment approach. As a result of the foregoing recommendations and actions, her net worth decreased approximately $175,000 in one year. A suit was brought by the claimant for $400,000 representing her actual losses, lost opportunity costs, fees and interest. The court ultimately ruled in the claimant’s favor and the award was covered by the financial advisor’s Errors and Omissions insurance carrier.
A management consulting firm was hired by a large retailer to improve the profitability of the retailer’s catalog sales division. The consulting firm recommended that the retailer outsource much of its call-center operations. It then helped the retailer select a vendor and advised on the terms of the contract. After considerable expense, the retailer reported that catalog sales were down while customer complaints were up. Additionally, the retailer found that the new call-center actually cost the company more to operate than when it had managed the service internally. The retailer sued the consulting firm for the lost income and the additional expense that resulted from the transition to the new call-center. The insurance carrier settled the claim for $1,200,000.
To learn more about our Professional Liability (Errors & Omissions) insurance products, speak with one of our experienced professionals today.