Things Not Covered By Errors And Omissions Insurance
Errors and omissions (E&O) insurance coverage is a form of professional liability insurance that protects people against claims made against them for inadequate or inaccurate work. However, the term "errors and omissions" has misled people into thinking that every mistake they make at work will be protected by E&O insurance coverage. Well, that isn't the case, and E&O won't protect you in the following cases:
E&O coverage is strictly meant to cover losses arising out of accidental mistakes, and not intentional ones. Consider a sneaker shop that accidentally orders very good counterfeits, believing that they are the real deal. In such a case, E&O would protect the shop from the associated losses. However, if the shop manager intentionally orders counterfeit sneakers because they are cheap, E&O coverage won't bail out the shop.
E&O coverage also doesn't extend to injuries arising out of negligent actions of your employees. For example, if your cleaners don't do a good job cleaning the floor and someone ends up slipping and falling on the slippery surface, it is considered a case of liability and not an error or omission damage. In such a case, it is the liability coverage of the business that will come to your rescue.
Errors Causing Employee Injuries
You should also not expect your E&O coverage to pay for errors that end up causing employee injuries. Consider the case of a restaurant that installs a new cooker, but doesn't handle the installation properly and it ends up causing burn injuries to the chef. In this case, E&O coverage doesn't apply at all; rather it the worker's compensation insurance coverage that will pay for the damages.
It shouldn't be surprising that E&O coverage won't compensate you for illegal acts arising out of the course of your business. Most insurance policies exclude illegal acts because insurers don't want to lose money by rewarding crime. Therefore, if one of your employees is found buying (knowingly) stolen merchandise because of discounted rates, E&O insurance won't shield you from the inevitable losses.
Lastly, E&O insurance will also not apply when a mistake ends up causing property damage. For example, if your in-house electricians make a mistake and end up frying some of your electrical installations, don't expect E&O to help you fix the damages. In this case, it is your property insurance policy that will come to your rescue, and you will be out of luck if you don't have such a policy in place.
As you can see, E&O coverage doesn't protect your business from all mistakes that may occur at your business. Consult a commercial insurance agent to help you figure out the type of coverage you need to protect your business from the common risks it faces.