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Home > Blog > Yes, Contractors Might Need Errors & Omissions Insurance
WEDNESDAY, JANUARY 27, 2021

Yes, Contractors Might Need Errors & Omissions Insurance

Most contractors know that the majority of their work gets done by getting their hands dirty. Whether you are a specialized or general contractor, you likely know that you have to do the hard work to truly get the job done. Still, contracting isn’t all about manual labor. It also involves a fair degree of analysis, counseling, consulting work and other professional services. Should you give advice, and that advice leads to problems for others, then you might be on the line for paying for their recovery costs.a man riding a skateboard up the side of a building 

Luckily, if you have errors & omissions (E&O) insurance, then you’ll be able to respond to any claims that question the validity of your professionalism. It’s there to help you if you ever cause a significant problem for one of your clients. 

Understanding E&O Insurance 

E&O insurance is a type of liability insurance, and like all forms of liability insurance, it is there to assist you when your mistakes cause harm to other parties, such as your customers. While your general liability policy might apply when you damage their work-in-progress, this coverage applies when your advice, or a failure to do your work properly, causes problems. 

Suppose that a client consults with you on how to build a new addition to their home, and you provide the requisite advice. However, once the project begins, major problems occur in the course of construction, which leads to significant financial losses for the client. At this time, the client might sue you for the losses they sustained. It is your E&O coverage that can both cover the costs of settling with your client and covering your own legal fees. Therefore, your business’s ability to recover from such a loss is much more assured. 

Why Contractors Need Coverage 

Most people don’t think that general contractors need errors & omissions coverage, simply because they don’t provide professional advice and services in the same way that doctors or lawyers might. Still, there is plenty of need for coverage within a contractor’s insurance portfolio, as well. 

Think of it from this perspective. As a contractor, you must plan and design projects, give advice on how the work should proceed and ensure it wraps up correctly. If you make mistakes during this time, then an E&O policy might help you pay for your losses.  

Suppose that you redesigned someone’s bathroom, but failed to install appropriate piping under the sink, which on its first use ruptures. As a result, the client might hold you responsible for these losses, and they could sue you. You might have to pay for the repairs and property damage, not to mention the costs of lawsuits that might arise. It is E&O insurance that will help you make sure you can do so.  

Therefore, coverage will take great strides to protect contractors, and make the business more secure in the future. 
Posted 1:02 PM

Tags: contractors, insurance, coverage, general, liability, errors, omissions
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