The Ultimate Guide to Errors and Omissions Insurance in Canada
By Daniel Schoester | Published on 20 May 2023
Table of Contents
Errors and Omissions (E&O) insurance is a type of business insurance that protects businesses and professionals from financial loss due to negligence, errors, or omissions in their work. If you are a business owner or professional in Canada, having E&O insurance can provide peace of mind and protection from potential lawsuits.
The coverage can cost a couple hundred to thousands of dollars annually, depending on your riskiness. The protection covers the cost of legal defence and claims you’ll need to pay out. Businesses and service professionals commonly use it. For example, the Real Estate Commission of Ontario requires all real estate agents to be protected. This will defend them if a client sues for any financial losses.
In Canada, E&O insurance is available through several insurers and brokers. When looking into coverage, you should consider costs, covered events, coverage limits, exclusions, and more. This guide will walk you through everything you need about errors and omissions insurance in Canada.
Errors and Omissions Insurance Explained
Errors and Omissions insurance, or Professional Liability Insurance, protects companies and professionals. It’s a type of business insurance targeted to anyone who offers advice, consultation or any other professional service to their clients. This insurance coverage protects against claims of negligence, errors, omissions, or any other form of professional misconduct that may result in financial loss to their clients.
Errors and Omissions Insurance is essential for professionals in various industries, such as finance, real estate, law, technology, and healthcare. It is crucial to note that even the most skilled and experienced professionals can make mistakes, resulting in significant financial losses to their clients. For instance, a financial advisor may give investment advice that results in substantial client losses. In such cases, the clients may sue the financial advisor for negligence. If the advisor does not have errors and omissions insurance coverage, they may have to pay for the damages out of their pocket, which can be financially devastating.
Insurance coverage of Errors and omissions typically includes legal defence costs, settlements, and judgments arising from covered claims. It is important to note that your coverage may vary depending on the policy. Furthermore, errors and omissions insurance coverage can also include protection against claims of copyright infringement, defamation, and breach of contract, depending on the policy. Working with an experienced insurance agent is essential to determine the appropriate coverage for your business or profession.
Benefits of Having Errors and Omissions Insurance
Errors and omissions insurance, commonly known as E&O insurance, is an essential investment for any business owner who provides professional services. This insurance coverage can help protect your business from financial loss from negligence or professional work errors. In the event of a lawsuit, it can also protect against claims that may be brought against you by clients for professional misconduct. It can help protect your business from financial loss, ensure that you remain operational in the event of a lawsuit, protect your reputation, improve your credibility with clients, and give you the peace of mind to focus on your work.
Lawsuit Coverage
One of the most significant benefits of having E&O insurance is that it can help ensure that your business remains operational in case of a lawsuit. Without this type of coverage, a lawsuit could bankrupt your business, leaving you without the necessary resources to continue operating. With E&O insurance, you can have peace of mind knowing that your business is protected from financial ruin.
Slander Defence
Another benefit of having E&O insurance is that it can help to protect your reputation. If a client files a claim against you for professional misconduct, it can damage your reputation and make it difficult to attract new clients. With E&O insurance, you can defend against these claims and protect your reputation.
Professional Appearance
Furthermore, E&O insurance can also help to improve your credibility with clients. Clients who know you have this type of coverage are more likely to trust you and feel confident in your abilities. This can lead to increased business and a more successful practice overall.
Peace of Mind
Finally, having E&O insurance can give you the peace of mind to focus on your work. When you know that your insurance protects you from potential lawsuits and financial loss, you can focus on providing the best possible service to your clients without worrying about the what-ifs. Coincidentally, concentrating on your work can result in fewer errors!
Who Needs Errors and Omissions Insurance?
It is also important to note that errors and omissions insurance is not just for large companies or high-risk professions. Anyone providing advice, consultation, or other professional service to clients should consider getting E&O insurance. Specifically professionals like medical professionals, accountants, real estate agents, architects, consultants, and even graphic designers. A single mistake or oversight can significantly impact a small business or individual’s financial situation, making errors and omissions insurance a wise investment. The remainder of this section will provide examples as to why particular professions could use E&O insurance.
Medical Professional Errors and Omissions
Medical professionals, especially those that provide medical services to patients, can benefit from E&O insurance. Even with the utmost care and attention given by a medical professional, mistakes can still happen that could result in significant financial loss for both the patient and the medical practitioner.
Accountant Errors and Omissions
Accountants must also consider E&O insurance to protect their clients from any mistakes they might make while providing financial advice or services. For example, they may forget to pay corporate taxes. Even minor calculation errors can result in significant losses for the client, which is why E&O insurance is essential for accountants.
Real Estate Errors and Omissions
Real estate agents should also consider getting E&O insurance to protect them from lawsuits for their professional services. Agents face various risks that could lead to a case, such as incorrect listing information or failure to disclose certain information about a property, and having E&O insurance can help protect against those risks.
Architect Errors and Omissions
Similarly, architects can benefit from E&O insurance to protect them against potential claims related to their work. Architects are responsible for designing and building structures that meet certain specifications and regulations, and any mistakes or oversights could lead to costly lawsuits.
Consultant Errors and Omissions
Consultants should also consider getting E&O insurance to protect them from any claims related to their work. Consultants are responsible for providing expert advice and guidance to clients, and if the advice results in losses for the client, they may seek damages from the consultant. Having E&O insurance can help protect against such losses.
Graphic Designer Errors and Omissions
Finally, let’s say you are a freelance graphic designer hired by a client to design a logo. After you complete the logo, the client discovers that the logo is too similar to another company’s logo and decides to sue you for copyright infringement. Without E&O insurance, you would have to pay for legal fees and any damages awarded out of pocket, which can be financially devastating for small businesses and independent professionals.
Errors and Omissions Insurance Coverages and Exclusions
| Coverages | Exclusions |
|---|---|
| – Legal Representation – Damage Costs | – Intentional Criminal Activities – Property Damage – Bodily Injury – Non-Insured Periods |
Coverages
Coverages are the items that your insurance includes. Your policy will protect you from these fees. Most policies cover legal costs associated with defending yourself in a lawsuit and any settlements or judgments awarded against you.
a) Legal Representation
Most E&O insurance policies will cover the cost of legal representation for your business if faced with a lawsuit. If you need to hire an attorney to defend your business, your E&O insurance policy should cover the costs associated with the defence.
b) Damage Costs
E&O insurance policies typically cover any damages awarded to the client due to a mistake or negligence. This means that if your client is awarded financial damages from a claim, your E&O insurance policy will cover the costs of the award. The policy may also cover attorney’s fees and other costs of defending your business in court.
Exclusions
E&O insurance policies are essential for businesses and professionals who provide advice or services to clients. However, it is critical to understand that these policies typically have exclusions that limit coverage. This section will discuss some of the standard exclusions in E&O insurance policies.
a) Intentional Criminal Activities
One of the most significant exclusions in E&O insurance policies is intentional or criminal actions. This means that if you intentionally or criminally act in a way that causes harm to your client, your E&O insurance policy will not cover you. For example, if you knowingly provide your client with false information that causes them financial losses, your E&O insurance policy will not cover you.
b) Property Damage
Another common exclusion in E&O insurance policies is property damage. If you damage your client’s property due to your professional services, your E&O insurance policy may not cover the damages. For instance, if you are an architect and your design causes damage to your client’s property, your E&O insurance policy may not cover the damages.
c) Bodily Injury
Bodily injury is also another common exclusion in E&O insurance policies. If you injure yourself due to your professional services, your E&O insurance policy may not cover the damages. For example, if you are a fitness instructor and your client is injured during a workout session, your E&O insurance policy may not cover the medical expenses.
d) Non-Insured Periods
It is also important to note that claims arising from work done before receiving coverage are not protected. This means that if a client files a claim for work done before you purchased your E&O insurance policy, the policy may not cover the claim. Similarly, claims that arise after the policy has expired may not be covered.
Types of Errors and Omissions Insurance
There are different types of E&O insurance policies available in Canada. Your insurance will only cover damages and legal expenses for the kinds of policies you have. For example, your insurance policy won’t cover you for cyber liability damages if you don’t have that policy. In addition, they will only protect you up to the coverage limit. This section will walk you through the most popular types of E&O insurance.
Professional Liability Coverage
This coverage protects professionals against claims of negligence or inadequate work. It covers court costs and any settlements up to the amount specified by the insurance contract. This liability insurance is generally required for professional advice-giving or service-providing businesses.
Cyber Liability Coverage
Like business cyber insurance, this coverage protects businesses against claims of data breaches, cyber-attacks, and other cyber-related incidents. It covers court costs and any settlements up to the amount specified by the insurance contract.
Media Liability Coverage
This coverage protects businesses against claims of defamation, libel, slander, copyright infringement, and other media-related incidents. The insurance contract specifies a maximum amount for covering court costs and settlements.
Medical Malpractice Insurance
This coverage protects medical professionals against claims of negligence or inadequate work. It covers court costs and any settlements up to the amount specified by the insurance contract. This type of liability insurance is generally required for medical practices and healthcare providers.
Understanding the Cost of Errors and Omissions Insurance in Canada
The cost of E&O insurance in Canada can range from a few hundred to several thousand dollars per year. The amount of coverage required also plays a significant role in determining the cost of E&O insurance. Businesses that need higher coverage limits will pay more for E&O insurance coverage than those that require lower coverage limits. Additionally, including more types of E&O insurance will increase your costs. This section will discuss other factors that determine your E&O insurance costs.
Industry Riskiness
One of the significant factors that affect the cost of E&O insurance is the industry. For instance, businesses in high-risk sectors such as healthcare, finance, and legal services are likely to pay more for E&O insurance coverage than businesses in low-risk industries such as retail or hospitality. This is because high-risk sectors are more likely to face claims of negligence or errors.
Business Location
Another factor that affects the cost of E&O insurance is the location of the business. Businesses located in areas with higher litigation rates or a history of high claims may pay more for E&O insurance coverage. This is because insurance companies perceive these businesses as at a higher risk of facing allegations of negligence or errors.
Business Size
The size of the business is also a factor that affects the cost of E&O insurance. Generally, larger companies with more employees and higher revenue are likely to pay more for E&O insurance coverage than smaller businesses. Larger firms are more exposed to risk and potential losses due to errors or negligence.
Claims History
A business’s claims history is another factor that can affect the cost of E&O insurance. Firms with a history of claims or lawsuits will likely pay more for E&O insurance coverage than businesses with a clean claims history. This is because insurance companies perceive firms with a history of claims as having a higher risk of future claims.
How to choose an errors and omissions insurance provider?
To get the best E&O insurance coverage for your business, comparing quotes from different insurers is essential. Experts recommend receiving at least three quotes to understand market rates properly. In addition, you should seek to compare quotes if your premiums increase 25% from the initial price. This section will explore additional factors to consider when choosing an E&O insurance provider.
- Covered Events: Ensure the insurance provider covers all the potential risks and scenarios your business might face.
- Coverage Limits: Compare the coverage limits offered by different insurers to ensure you get the best value.
- Cost: Make sure you compare the price of various providers and get the best value for your money.
- Exclusions: Carefully read the policy to understand applicable exclusions and determine if the coverage meets your business’s needs.
- Reviews and Ratings: Read customer feedback, and look at online reviews and ratings to ensure that the company you are considering is reliable and can provide excellent customer service.
- Reputation: Investigate the company’s history and how long they have been in business. This will give you an indication of the reputation of the company and its track record.
- Claims process: Make sure the procedure for filing a claim is straightforward. Ensure you understand all the steps involved in making a claim and how long it takes to receive a settlement.
How to Make a Claim for Errors and Omissions Insurance
If you need to claim E&O insurance coverage, following the process outlined in your policy is essential. Generally, the process involves the steps below. Always ensure you have the necessary paperwork, such as emails, invoices, and contracts.
- Call your insurance company and explain the situation. Ask if they have a case number or other information you can use to start your claim.
- Get all the paperwork you need to file a claim.
- Send all of the documentation to your insurance company.
- Wait for your insurer to process your claim.
The Bottom Line
Errors and Omissions insurance provides critical protection for businesses and professionals who offer advice, consultation, or any other professional service to clients. With the right coverage, E&O insurance can help protect your business from potential financial loss due to negligent acts in your professional work. It’s important to carefully assess your business needs and compare quotes from different insurers before choosing the proper E&O insurance coverage. By doing so, you can ensure that your business is protected from potential lawsuits and other professional misconduct claims.
FAQ About Errors and Omissions Insurance in Canada
Errors and omissions insurance is a type of insurance for professional service providers. It helps to protect them if they make a mistake or do something wrong when working with a client. This type of insurance is designed to provide financial protection in case of a lawsuit or claim alleging negligence, errors, omissions, or wrongful acts while delivering professional services.
Yes, errors and omissions insurance generally covers negligence. If a client suffers financial loss due to negligence while providing professional services, E&O insurance may help pay for legal costs or damage awards from the claim. However, always review your contract to determine coverage and exclusions.
Errors and omissions insurance covers claims alleging errors, omissions, wrongful acts, or negligent conduct while providing professional services. This type of insurance generally pays for legal costs and damage awards if a client suffers financial loss due to negligence while delivering professional services. The exact coverage of the policy will depend on the policy terms and conditions. Reading the policy document carefully is essential before deciding on a plan.
You can get errors and omissions insurance through brokers, online marketplaces, or directly from insurance companies. It is essential to compare quotes from at least three insurers before deciding on the right policy for your business. Additionally, it is necessary to read and understand the terms and conditions of each policy before making a decision. This can help ensure that you choose the right coverage for your needs.
Errors and omissions insurance works by protecting against financial loss due to errors or negligent acts while providing a professional service. In case of a lawsuit or claim alleging such negligence, E&O insurance may help pay for legal costs or damage awards from the suit.
Yes, errors and omissions insurance is the same as professional liability insurance. Both terms refer to professional liability insurance covering claims arising from negligence or errors while providing services. They are generally used interchangeably and refer to the same type of coverage.
Yes, professional indemnity insurance is the same as errors and omissions insurance. Both terms refer to professional liability insurance covering claims arising from negligence or errors while providing services. They are generally used interchangeably and refer to the same type of coverage.
Yes, Canadian realtors need errors and omissions insurance in some provinces. For example, the Real Estate Council of Ontario requires it for all real estate professionals in the province. The same is true for British Columbia. However, always double-check with your province’s regulatory body.
