A home business offers savings on rent and other expenses that come with having a separate office or facility. However, it doesn’t insulate business owners from the risks of liability and loss for negligent performance of business services. For coverage of these potential losses, business owners can turn to errors and omissions insurance.
What Are Errors and Omissions?
Errors and omissions refer to the faulty performance of professional services, often known as professional malpractice. Clients, customers, and others with financial losses bring claims of this sort against professionals such as attorneys, architects, accountants, engineers, financial advisers, insurance brokers, real estate agents, and information technology consultants.
What constitutes malpractice depends on the particular profession. For attorneys, the term may mean missing a deadline to file a lawsuit. Accountants face malpractice claims for negligently filing tax returns or misreporting the value of assets on financial statements. Other examples of errors and omissions include a surveyor incorrectly locating property boundary lines, an insurance agent incorrectly telling a customer that a peril is covered, and an information technology professional failing to install antivirus software, causing customer information to be stolen.
What Benefits Are Provided?
Errors and omissions insurance aims to save home businesses from the financial toll of malpractice claims and litigation. One benefit rests in the payment of judgments and settlements. Customers, clients, and others may sue for as much as tens or hundreds of thousands of dollars due to losses resulting from mistaken advice or erroneous services. Most of these losses are financial. For instance, a bad survey may require a homeowner or builder to remove and rebuild a structure—even a completed building—that encroaches upon another property. A lawsuit barred by a statute of limitations subjects the lawyer to liability for what a plaintiff would have recovered if the lawsuit had been filed on time.
Errors and omissions insurance pays the expenses of defending a malpractice lawsuit. The insurance company hires and pays the lawyer. While the home business owner may avoid the otherwise mountainous costs of litigation, the insurer typically exercises more control over the outcome of the suit.
What Isn’t Covered by Errors and Omissions?
Professional malpractice is the focus of errors and omissions insurance. As a result, this type of business insurance doesn’t cover claims for personal injuries or property damage arising out of the home business. These excluded risks include defective conditions in the home, an employee of the home business who injures someone while performing work, or some activity that causes an explosion and damages neighboring properties. Moreover, errors and omissions doesn’t cover intentional torts such as fraud, which means claims arising from deceitful or intentional misrepresentations aren’t covered, but negligent misrepresentations are.
Why Not Homeowners Insurance?
Standard homeowners policies don’t cover damages resulting from commercial use of the home, including loss of the home or injuries to customers or clients resulting from activities in the home. While a separate policy for home business use may encompass personal injury or property injury claims, it doesn’t solve the problem of malpractice arising from a home business.
More people are operating businesses from home nowadays, so it’s a good idea to work with experts to ensure your business is covered against all types of losses. Look to the professionals at Altra Insurance Services for sound advice based on years of experience in the insurance industry. In addition to business insurance, we offer reliable homeowners, renters, and car insurance San Diego, residents can call one of our expert agents today at 619-474-6666 to discuss their insurance needs.