Many professionals for-go a policy and serve their clients without maintaining errors and omission (E&O) insurance. Some find the cost of malpractice insurance onerous while others believe they are not at risk of being sued because they provide the best possible services to their clients. But all it takes is one unhappy client for an attorney or title agent to be entangled in an expensive and time-consuming lawsuit. Whether the lawsuit is defended in trial, arbitrated, or settled out of court, relief from its effects, if any, will be years away.
Operating without an E&O insurance policy is a significant professional and personal risk. Here’s what you can expect if you decide to for-go an E&O policy.
LACK OF PROTECTION FROM FRIVOLOUS LAWSUITS
You have great clients and always strive to ensure they receive the services they have paid for and have been promised. But no matter how hard you work to keep your clients happy, a super picky or disgruntled client may still take issues with the advice or service you provided and decide to file a claim.
Even if the allegations are unfounded, a lawsuit can cost thousands of dollars in defense fees. Even just one groundless lawsuit brought up a vindictive client could wreck your business if you don’t have E&O insurance in place.
CLIENTS MAY DOUBT YOUR CREDIBILITY
Displaying an E&O insurance certificate in your office is not an admission that you might make a mistake or lack confidence in your abilities. The opposite is true. With E&O insurance, clients get the perspective that you care about them and are confident in your quality of work but still able to compensate for anything that might go wrong in the rendering of your professional services. Without errors and omissions insurance, some clients may doubt your credibility and take their business to your competitors.
What professional is going to focus on their job when they’re constantly worrying about every little mistake that might affect their business? Without an E&O insurance policy, you won’t have peace of mind or the confidence to focus on what truly matters – running and growing your business and ensuring your clients are cared for. Paying for errors and omissions insurance is more tolerable than having a large, unpredictable risk hovering over you. You basically replace a large risk with a smaller, known expense (insurance premium).
YOU WON’T HAVE COVERAGE WHEN YOU’RE AT FAULT
While mistakes and errors are often out of your control, you could end up in court if there are actual issues with your professional services. If a client’s claim is legitimate, you’ll have to pay court costs and attorneys’ fees. Don’t forget the financial burden if you reach a settlement or the court renders a huge judgment. If you don’t have an E&O insurance policy, you’ll take care of all these crippling costs out of pocket.
YOU RISK LOSING YOUR FIRM OR AGENCY AND GOING INTO DEBT
Having an active lawsuit without errors and omissions insurance policy can mean the end of your firm or agency. While the sailing is smooth, you may not think about the problems could result in financial losses. Unfortunately, all it takes is a single claim from an unsatisfied client to lose a significant amount of money.
Is your business liquid enough to pay for everything? Or will your assets be enough to offset the compensation amount if you decide to sell them? If not, you might have to apply for a loan or declare bankruptcy.
Even with bankruptcy, any asset obtained within a given period of time can still be transferred to the plaintiff. If you operate your business without E&O insurance, you won’t have a “cushion” for situations like this.
LOSS OF PERSONAL ASSETS
Some business structures do not protect personal assets from business lawsuits. In the case of sole proprietorship or general partnership, for instance, you may be on the hook for settlements or judgments against your business. Your personal assets will be followed until the judgments are completely paid.
A single errors and omissions claim can wipe away a lifetime of hard work. While there are several other things you can do to protect your personal assets from business lawsuits, keeping your E&O coverage paid up is crucial. Without it, you can expect some level of personal financial ruin.
ENDURING SUBPAR LEGAL REPRESENTATION
An E&O policy will cover the fees associated with your legal representation. This allows you to afford well-qualified attorneys willing to go the extra mile and defend you. If an unexpected claim is filed against you and you don’t have professional liability insurance, you’ll have to pay legal fees out of pocket.
This may force you to hire an attorney you can afford to pay and throughout the legal proceedings, you’ll be wondering whether they have enough experience and capability to win the case or minimize the costs.
They may not be able to provide the representation you need to win the case. Unless you’re an experienced lawyer in this field yourself, you might realize that working without E&O insurance is one of the worst decisions you’ve ever made.
YOU RISK A BAD REPUTATION
Most professional liability insurance policies require that the insured give timely notice when threatened by a client with a malpractice lawsuit, a claim is made against them, or a lawsuit is filed. Early reporting sometimes allows for intervention, wherein the incident is quickly dropped or settled.
This can protect your firm or agency name and reputation. Without an E&O insurance policy, there’s little likelihood that a claim or lawsuit will be prevented. Keep in mind that word can quickly spread, causing serious damage to your company.
PROVIDING HALF-HEARTED SERVICES
When lawyers and title agents lack errors and omissions coverage, they often try to provide their services in a cautious manner. They believe offering unfocused guidance and non-committal answers will protect them from lawsuits.
In reality, however, being extra careful will not provide complete protection from legal proceedings. As mentioned earlier, clients can sue you even if the allegations are unfounded. You can be a truly great professional by having the E&O coverage you need and ensuring your clients receive the best services.
YOU’LL PAY FOR EMPLOYEES’ MISTAKES
A simple mistake by an employee, trainee, or independent contractor can cause a mature, successful business to go bankrupt overnight. If a client sues your company for an employee’s negligent advice misrepresentation, violation of good faith, or any error that caused financial loss, you’ll be on the hook for defense costs and compensation, even if you’re not at fault. You’ll be left to should most, if not all, of the expenses if you don’t have an E&O insurance policy.
LET ATTORNEYS FIRST INSURANCE PROVIDE THE RIGHT E&O COVERAGE
At Attorneys First Insurance, we make buying an E&O insurance policy as easy and affordable as possible. We offer better coverage at considerably lower rates and better terms than other E&O insurers. Our mission is to provide the right coverage for the needs of attorneys and title agents across the U.S. Get a quick quote and start protecting your firm or agency today.