Why Errors and Omissions Insurance is Necessary for Your Law Firm

Errors and Omissions (E&O) Insurance, also referred to as Professional Liability Insurance, provides a safety net for law firms. This insurance policy helps protect the assets of your law firm against claims of inaccurate advice, misrepresentation, and negligence. Basically, an E&O policy will provide a form of financial relief should a costly error or mistake be made.

E&O Insurance vs. General Liability Insurance

Errors and Omissions Insurance and General Liability Insurance may seem similar but they are actually unique. A General Liability Policy provides financial protection for claims made regarding property damage or personal injury. On the other hand, a typical Professional Liability Policy offers protection against monetary losses for things such as reputation, data breaches, intellectual property infringement, and other forms of intangible property.

Disputes are usually pricey for any law firm. Even when the disputes are resolved relatively quickly, the costs can run into thousand dollars. If the dispute drags for months, the expenses could be severe for your business.

An E&O policy will provide relief to your law firm by covering expenses such as:

Attorney fees – If you hire another law firm to handle your case, you will likely be charged an hourly rate. The rate can be quite high, depending on the complexity of the lawsuit.
Settlements – Most parties agree to settle disputes out of court in order to save money. However, depending on the case, you may still have to pay the plaintiff.
Administrative costs – Before a case can be determined in court, there is a trading of documents among the parties involved for examination. A professional liability policy can help cover related costs, such as photocopy charges, software, process, shipping, and others.
Court costs – You will incur some costs if you will be using the services of a court reporter or filing documents at a deposition.
Judgments – If your law firm loses the trial, you will have to pay a court judgment. Failure to pay the judgment can lead to liens being placed on your firm’s assets.

You should invest in Errors and Omissions Insurance before a risk is taken. E&O Insurance rates vary from state to state. However, it is critical for all law firms to have this insurance in order to guard against unforeseen circumstances.