How to Protect Your Business With E&O Insurance in Texas

If a company offers unique products and professional services, errors and omissions insurance (E&O insurance) is a vital need. You cannot avoid accidents and mistakes at all times. The last thing you would want to be held accountable for is when a client is not satisfied with your product or service, resulting in pricey legal charges. 

Obtaining errors and omissions insurance in Texas from a reputable insurance company will help you stay financially safe in times of unfortunate events. It could help you mitigate your financial loss in case your business faces costly claims. Here’s what you need to know about E&O insurance in Texas. 

What Is Errors & Omissions Insurance?

Errors and omissions insurance is also known as professional liability insurance (PLI) and professional indemnity insurance (PII). It protects business owners and professionals from lawsuits due to mistakes in providing professional services. This type of insurance covers your defense costs (i.e., court costs), which can be too high for a firm to pay on its own.

Texas E&O liability insurance (professional liability insurance) protects businesses and individuals from damages and legal defense expenses caused by negligence, errors, or omissions in performing their professional duties. Regardless of the result, whether you are found guilty or innocent, or even if the claim is dismissed, an E&O insurance policy will cover all your legal fees. 

E&O coverage is not included in general commercial liability insurance. However, it is an inexpensive addition to commercial insurance policies.

Some insurance agencies offer appraiser errors and omissions insurance policies to realtors, home inspectors, brokers, and other real estate professionals. An E&O insurance policy covers real estate-related claims, even those brought on by lenders.

Doctors should have medical malpractice insurance and must not start seeing patients without it. The same goes for businesses without E&O insurance in Texas. You can work with a commercial insurance professional to identify omissions and errors insurance packages that best suit your needs.

Some clients require proof of errors & omissions insurance coverage before using your service. E&O coverage is not required in Texas, but having this professional liability coverage offers crucial protection, and some states require real estate agents to have it. This professional liability insurance can help real estate professionals with their legal expenses if a lawsuit is filed against them due to performance mistakes.

What Does Texas Errors and Omissions Insurance Cover?

E&O liability insurance protects your business from claims of:

  • Negligence
  • Errors
  • Omissions
  • Misrepresentation
  • Breach of good faith and fair dealing
  • Fallacious advice
  • Personal injuries like libel and slander

Defense attorney charges, legal costs, and liability suits can be costly. E&O policy coverage can help alleviate your expenses, paying for your court staff and other administrative costs. Settlements and judgments can cost thousands to millions of dollars. If you are not covered, you are at risk of paying these types of expenses out of your pocket. But if you have it, you can relax knowing that this professional liability policy will cover most of the costs.

What Does Errors and Omissions Insurance Not Cover?

Texas errors and omissions liability insurance policies do not cover intentional acts of negligence or instances of purposeful customer or client deceit.

  • General liability claims E&O insurance does not include bodily injury or property damage claims to third parties. Instead, you will need a general liability insurance policy to help you with this type of claim.
  • Employee claims Claims of job-related injuries and illnesses and other lawsuits that relate to employment are not covered by E&O liability insurance. Workers’ compensation insurance will cover these.
  • Claims that happen before your policy is activated—An E&O policy only covers claims resulting from incidents that occur on the day your policy becomes active or afterward. You need to add a retroactive date to your coverage if you want to be covered for such claims.

Who Needs E&O Insurance?

Here are some businesses that need E&O insurance:

  • Attorneys and law firms
  • Accountants and financial institutions
  • Engineers and engineering firms
  • Advertising firms
  • Teachers and educators in private practice
  • Educational businesses
  • Marketing firms
  • Website developers
  • Consulting companies
  • Cultural organizations like museums and galleries
  • Medical offices and healthcare facilities
  • Barbershops and hair salons
  • Printing and publishing companies
  • Veterinary offices and pet groomers

A female notary puts a seal on a legal document.

E&O Insurance for Notary 

Although notaries don’t require public errors and omissions insurance by law to operate in Texas, the nature of the work of notaries is such that they should consider getting it. Insurance for the notary public is specifically designed to protect them if they make an unintentional mistake or if they are victims of a false claim. 

Not having notary public errors and omissions insurance in these cases could cost you thousands of dollars. And even if the lawsuit is false, it would require you to pay thousands of dollars to prove your innocence. Therefore, insurance for notaries can be very helpful as it also covers legal defense costs, legal fees, or court costs.

Why Do You Need Errors & Omissions Insurance?

Texas E&O liability insurance is definitely something you should consider if you don’t want to pay for the legal expenses out of your pocket, which can put your business at financial risk. 

Even if your customers drop their claim, your legal fees will still cost a lot. The legal costs are higher when you are at fault and have agreed to settle the claim out of court because settlements usually cost a considerable amount of money. 

Hence, it is vital to get your company protected with an E&O insurance policy. It would be best if you looked at it as a form of business risk management.

Texas Errors and Omissions Insurance Cost

The cost of E&O liability insurance in Texas varies for each company. Regardless of the price or the value of your business’ mistakes, it is worth paying an insurance premium. Different factors can influence your errors and omissions liability insurance cost.

  • Business risk— If your business is considered to be risky, you will likely pay a more expensive rate. For example, the owner of a financial consulting company that advises on investments worth millions of dollars has a higher premium compared to a smaller financial advisor.
  • Insurance coverage/policy limit— The E&O liability insurance cost depends on the policy limit as well. This is the maximum sum of money an insurance company pays out to its policyholder when an insured loss occurs. The higher the coverage limit, the higher the premium the policyholder needs to pay.
  • Location Rates can vary due to your business’ location. You will likely have to pay a higher premium if your business is in a busy city.

To help you prevent professional liability claims and/or lower your E&O liability insurance cost, we strongly advise you to train your employees properly, check the contracting system of your business to keep quality at a satisfactory level, and communicate with your customers as regularly as possible to make sure they are satisfied with your products and/or services.

Texas E&O insurance costs are different for all small businesses. They will depend on your needs and risks. You can get an E&O insurance quote online or get in touch with our insurance agents to help you get the right coverage to propel your business forward.

If you own a small to medium-sized business, you might be interested in learning more about our Business Owners Policy as well!