Professional Liability (E&O)

This insurance covers liability arising out of negligent acts in rendering, or failing to render, professional services protects business professionals whose clients could claim damages as a result of the business professional’s faulty performance. Faulty performance may be

Commercial Insurance

Commercial Insurance 101

Whether you own a small or large business it's important that you make sure you have coverage in place to deal with the unexpected. Commercial General Liability (CGL) insurance will protect you against uncertainty and will cover liability claims made against your business if your Company is ever held liable for third party property damage, injuries, or death caused by your business operations, services, or employees.

Without a commercial general liability policy you expose your business to these claims and make your company vulnerable to large financial loss. The severity of these losses can vary greatly depending on the nature of your business. A common example of a liability loss may be for slip and fall, where the business may owe a duty of care to visitors of their property but failed to meet this requirement, they may be found legally responsible to pay for their injuries.

There are four main types of coverage included in the Commercial General Liability policy. These coverage sections include:

Bodily Injury & Property Damage Liability

Personal Injury

Medical Payments

Tenants' Legal Liability

because of a negligent act, error, or omission by the professional; hence, the name of the insurance. Errors and omissions insurance, also known as ‘E&O’, protects the business professional by shielding his or her assets and paying for his or her defense if a client makes

a claim. It protects the professional’s clients by ensuring that there will be adequate funds to pay for damages incurred if the professional’s services are deemed to be faulty.

In Ontario, errors and omissions insurance is mandatory for professionals such as Estate Planners and Financial Consultants.

If you provide professional services that involve getting paid for advice, you should check to see whether or not provincial legislation requires you to carry errors and omissions insurance.

Other types of business professionals who might need errors and omissions insurance include computer consultants, software developers, planners, architects, accountants. In other words, if your clients might sue you for damages resulting from faulty performance of your services, you should consider carrying errors and omissions insurance.

There are no standard policy wordings for E&O insurance. A doctor has different exposures from an accountant who has different exposures from a computer programmer.

Most E&O policies will cover judgments, settlements and defense costs. Many are also written on a “claims made” basis which means the claim must be made and/or reported within the policy period. E&O policies have a retroactive date which is usually the effective date of your first E&O policy, assuming you have not cancelled your E&O policy.

If a claim arises out of acts that have occurred prior to the retroactive date, there is no coverage. In a sense, the farther back the retroactive date, the more coverage you have. It is important to note that if you cancel your E&O policy, and purchase a new E&O policy at a later date, your retroactive date will be the effective date of the new policy.

Some E&O policies have a discovery period. A discovery period is a provision that allow the insured a certain period of time after cancellation of the policy to report losses that occurred during the policy period. An example would be a consultant who has retired and has let the policy lapse.

If the discovery period provision in the policy is 1 year, the consultant may report losses after retirement that occurred during the policy period. Depending on the business, industry, or profession, the length of the discovery period varies and there may or may not be an additional cost.

E&O costs vary greatly depending on the size of the business, the exposure, and the limits required. Limits can range from $100,000 to $5,000,000 or higher. E&O quoting usually involves an application, supplementary questions if necessary, resumes of the principals, and sample contracts.

Errors & Omissions should not be confused with general liability (Commercial General Liability) which covers property damage and bodily injury to third parties as a result of your negligence. A slip and fall would be a common example of a claim that would fall under a general liability policy.

Always consult with your insurance broker as this insurance can vary greatly among industries and professionals.

Perils

Options regarding perils and covered losses are varied. Builder's risk policies are usually obtained after construction contracts have been signed because they're a material prerequisite to beginning the work. They're often obtained without thought as to their terms and conditions, and without consideration as to what the specific perils of the construction might be. This is when coverage problems arise. Perils should be carefully thought out and addressed before the construction contract is signed.

Time Considerations

If you live in downtown Toronto the rate may be higher than if you live in rural Ontario. Most insurers require builder's risk policies to be applied for before the project is 30 percent complete, but it's widely recommended that the policy be effective for the named insureds before digging even starts. Policies are ordinarily written for periods of three months, six months or a year. They're often renewed, but renewals are ordinarily issued only once. Coverage ordinarily ends when the owner takes possession, even though minor finishing might need to be completed. Other conditions or events after the owner takes possession might control when coverage ends.

The more costly the project, the more complex builder's risk insurance might become. Some policies are nearly boilerplate while others must be given considerable thought and drafting skills. Whatever you might be building that's of significant value, you'll want builder's risk insurance.

Builder's Risk Insurance

The owner of the building being constructed usually maintains the policy, but sometimes the general contractor will buy the coverage. In either case, both parties are customarily named insureds on the policy. A lender might also be an insured. Suppliers are not usually named as they don't usually have an insurable interest in the construction project.