Error And Omissions (E&O) insurance is one of the most important insurance policies your company must hold. Yet many small businesses don’t carry E&O insurance and are leaving themselves open to financial ruin in the event of a claim – regardless of whether there is negligence by the firm.

What Is Errors And Omissions Insurance?
In the world of an architect, Errors and Omissions, or Professional Liability insurance, will cover both you and your company should a claim arise based on the services you provide,.
Most policies will cover you for judgments, settlements and the cost to defend you. Even if the case against you is found to be groundless, you will still be covered for the legal representation costs incurred if the policy terms are triggered to respond to the claim. While many policies carry a deductible, you can find those without this out-of-pocket cost.
Why Does An Architect Need Error And Omissions Insurance?
Many people assume that this insurance covers lawyers, consultants, and other professions from making mistakes when consulting with a client. However, it isn’t just about mistakes. Delays or not completing work on time can also disrupt the lives of your clients and can lead to claims against your firm. For instance, what if you don’t submit the plans to a new building in time, and the client needs to rent out office space for longer than planned? A likely issue can arise when there is a misinterpretation of renderings. For example, a designer misinterprets your renderings and orders costly materials that are not going to work with your plans. Your mutual client could become upset and sue both of you for professional negligence and demand that you reimburse their company for the useless materials. While you may not believe this to be your fault, you can be named in the lawsuit and have a responsibility to appear in court. You will need an attorney to defend you, and that is where your E&O policy would be there to respond.
If you’re in business long enough, it’s not a matter of if you firm will be sued, but when. And with the average architectural firm being sued at least once in it’s lifetime, the policy to protect the firm’s assets is well worth the price of admission.
What Happens If You Don’t Have Error And Omissions Insurance?
The main cause for concern when a claim is made against you is that you have to pay for all the defense costs yourself. These can be fairly expensive, depending on the size and complexity of the claim.
If the claim leads to an indemnity payout,you would have to pay the claimant out of the firm’s own funds. For many firms, this would financially ruin them, and they would be forever in debt. This would make it hard to establish any business, gain a mortgage or take out a loan in the future.
Therefore it is always better to be safe than sorry!
Have you ever had to share the burden of a claim? Could Error and Omissions insurance protect your financial assets?
Tell us your story in the comments below.