As many in the financial industry have come to realize, lawsuits will happen regardless of how carefully the work is done, or how baseless some claims may be. Clients sometimes sue an advisor or broker after an investment goes sour, even if the risks were well known beforehand and the work was done within the guidelines established by the client. In these cases, even if a court or arbitration panel finds in favor of a broker or investment advisor the legal fees can be very high, and professional liability insurance, often referred to as errors and omissions (E&O) coverage is vital, particularly in these situations.
A person or company that has had numerous litigation problems has a better understanding of the risks, as opposed to a company with little or no negative experience, and therefore might assume E&O insurance to be an unnecessary added expense.
E&O insurance protects companies and individuals against claims made by clients for inadequate work or negligent actions and often covers both, court costs, and any settlements up to the amount specified on the insurance contract.
Those whom benefit the most from a professional liability policy
Doctors, lawyers, dentists, architects and engineers, and other high profile service providers also need the protection that an E&O policy provides against claims resulting in large settlements that could otherwise cost them their entire business enterprise.
For example, as a management consultant, any advice given to clients can often make or break their business. That’s a huge responsibility, and one that shouldn