Southern Colorado Insurance Center Blog

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Understanding Professional Liability (E&O) Insurance

At Southern Colorado Insurance Center we want to do everything we can to help you protect your business, and help you understand the importance of your insurance. Most business owners know that they need general liability coverage, which provides protection in situations where accidents cause personal injuries or property damage.

But imagine if your event planning business was contracted to plan a gala celebrating a company’s 100th anniversary. You send invitations, arrange the catering, rent tables and chairs, order flowers and decorations, and arrange for a sound system. Then you discover that there was a mix-up: the invitations give the event date as the 7th, but the caterer is contracted for the 17th and the sound system agreement says the 18th.

In many business situations an error or omission can lead to financial losses for your clients. Professional liability insurance can cover claims of negligence, misrepresentation, or inaccurate advice. Depending on your particular situation and coverage options, it can cover judgments or settlements, and sometimes defense costs or punitive damages.

We are all human, and you can’t guarantee that mistakes will never happen. You can take steps to lower your chances of an error.

  • Strive to communicate clearly and manage expectations before, during, and after delivering any service.
  • Rely on written contracts. Specify actions to be taken, actions to avoid, and who is responsible for each. If you have questions, be sure to ask, and encourage your clients to ask questions as well.
  • Clearly state all fees in the contract without ambiguity. For example, don’t assume that a fee for an unstated period of time must mean it’s a daily rate.
  • Set up standard operating procedures to ensure consistency from client to client.
  • Set up your business with quality controls to minimize miscommunication. Maintain accurate and detailed written records, including time stamps where appropriate. Consider how procedures can be audited.

To learn more about professional liability coverage, contact us at Southern Colorado Insurance Center and we can help you explore your options.


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