The Errors & Omissions Insurance (E&O) is the useful insurance policy that shields you and your employees in case one of your clients accuses you of making mistakes that cost them financial loss. Here the accusation can include claims that your work was inefficient or unprofessional. If a displeased customer blames you for the financial services they incur and files a legal case against you, here, your E&O insurance policy can play an important role in defending you and your business in various ways.

How does the E&O insurance policy protect a business?

Also called, professional indemnity insurance, the E&O insurance shields you against monetary expenses that may arise due to a claim filed by your customer. Whenever lawyers are involved, it becomes a costly affair. Even if you can resolve the issue quickly, a few hundred rupees will still be wasted. If it drags for months, the costs can be too high.

The professional liability insurance can help you pay for legal expenses, which include –

  1. Lawyer Fees – Usually, good lawyers charge on the hourly basis, and a legal case involves a lot of time.
  2. Court Costs – Filing documents with court involve costs.
  3. Administrative Costs – For the smooth disposition of legal cases, a lawyer needs to examine lots of documents, which means processing and photocopy of files, etc.
  4. Settlement – Even if you give your consent for the out of the court settlement, you may still have to pay to the plaintiff depending on the compensation mutually agreed.

A quick glance over the benefits of a professional liability insurance –

  • Wide cover against various types of risks and losses
  • Cover offered for legal expenses
  • Hassle-free documentation process
  • Option to increase or decrease the coverage
  • Flexibility to customize

Case: 1

A 30-year old Ravina Sinha was preparing breakfast for her family when she suddenly complained of severe chest pain and fainted. Luckily, her husband, Suresh was at home at that time, and he immediately took her to a nearby clinic. The on-duty doctor Rahul admitted her and started her treatment without wasting time. Even after trying for an hour, when Ravina did not regain consciousness, the doctor administered her an injection without checking her medical history.

Unfortunately, Ravina was allergic to certain medicines and the injection given to her, had those medicines. Due to its impact, Ravina got a heart attack in a few minutes, and later she died. The post mortem report revealed some blockages in the veins, however, due to the negligence of the doctor, she was not given the right treatment.

Suresh filed a case against the clinic for medical negligence. The court verdict was in favour of Suresh and the doctor, Rahul was asked to pay the compensation of Rs 50 lakh. As Rahul was covered under the E&O insurance policy, the insurer paid the compensation amount, including legal charges.

Case: 2

It was the pre-wedding shoot of Jiva for which she was very excited and started preparing for it at least two months in advance. She chose a highly reputable salon of her area, and when she went there for her last hair sitting, the beautician suggested her a haircut and convinced her that it will look good on her and will accentuate her beauty.

However, the hairdresser gave a terrible haircut. While treating Jiva’s hair, the hairdresser used some bleaching chemicals that were so strong that they burnt her scalp and also caused hair fall. It was indeed an emotionally devastating moment for Jiva which pushed her into depression and also affected her pre-wedding shoot.

Jiva sued the saloon for Rs 20 lakh. Luckily, the saloon had a professional liability insurance, and the insurer covered the compensation amount. As the case was dragged for nearly four months in the court, the insurer also paid the legal charges to the saloon.

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