Errors and Omissions Insurance in Massachusetts

What is Errors and Omissions Insurance?

Professionals are expected to correctly apply their expertise to the work they do. All professionals, however, are humans and can make mistakes. Errors and omissions insurance helps protect professionals in Massachusetts from potential lawsuits filed over mistakes they make.

Errors and omissions insurance is a form of liability insurance that’s specifically designed for professionals who give advice. If a professional gives a customer or client poor advice, the customer or client might file a claim or lawsuit seeking compensation for any damage, injury, or loss they sustained because of the advice. An errors and omissions policy may help pay legal fees and settlements associated with such a claim or suit.

WHAT PROFESSIONALS IN MASSACHUSETTS IS ERRORS AND OMISSIONS COVERAGE RIGHT FOR?

Massachusetts professionals who primarily give advice may want to get errors and omissions coverage. This can cover a wide array of jobs, responsibilities, and industries.

Some examples of professionals that this type of professional liability insurance might be right for, include:

Stock brokers and investment advisors
Attorneys
Real estate agents and brokers
Insurance agents and financial planners
Trustees
Appraisers

Professionals who apply a skill may also need coverage for mistakes, but a different type of professional liability insurance may be more appropriate for them. For example, physicians who practice medicine typically get malpractice policies that are specifically written for the medical field. Estheticians, similarly, may want policies that are created for their field and provide protections for the treatments they administer by hand.

WHAT SORTS OF INCIDENTS DO ERRORS AND OMISSIONS POLICIES COVER?

As is the case with most insurance policies, the particular incidents that an errors and omissions insurance policy provides coverage for are determined by that policy’s terms, conditions, and exclusions. Some examples of incidents that a policy, depending on its terms, conditions and exclusions, might cover include:

A real estate agent who neglected to give their client all of the information they had about a property, and the client later learned that the property wasn’t zoned for their intended use
An accountant who mistyped a figure when filing a client’s taxes, and their client had to pay interest and penalties because of the mistake
A stockbroker who failed to quickly execute a client’s orders, and the client’s portfolio lost value
A lawyer who recorded the incorrect date for a case, and their client’s case was lost because they missed the deadline

What Are Claims Made Policies?

Most errors and omissions policies are written as “claims made” policies. Claims made policies normally determine whether a claim is covered based on when it’s filed, rather than when the mistake leading to the claim occurred. Thus, errors and omissions policies typically cover claims that are filed during their effective coverage period.

There are, however, a couple of exceptions to this general rule. First, most policies include a retroactive date, which determines how far back the policy’s errors and omissions coverage extends. Mistakes made before this date usually aren’t covered by a policy, while those made on or after this date typically are.

Second, some errors and omissions policies include discovery periods, which may be anywhere from a few months to several years. Discovery periods usually extend a policy’s protections beyond the final date of the policy period, providing coverage for claims that are filed during the discovery period but occurred during the policy period.

How Can Professionals in Massachusetts Obtain Errors and Omissions Coverage?

Massachusetts professionals should work with an independent insurance agent to find an errors and omissions insurance policy that suits them. Since most errors and omissions policies are claims made policies, they can be complex. An independent agent, however, will have the knowledge and expertise to explain how different policies’ retroactive dates, discovery periods and other nuances affect the protections the policies afford.