Errors and Omissions Insurance in Texas: Everything You Need to Know

If you work in a profession that involves providing advice or services to clients, it’s important to protect yourself against potential lawsuits that may arise from mistakes or errors in your work. One type of insurance that can provide this protection is errors and omissions (E&O) insurance. This article will provide an in-depth look at E&O insurance in Texas, what it covers, and why it’s important for professionals in a variety of industries.

What is Errors and Omissions Insurance?

Errors and omissions insurance, also known as professional liability insurance, is a type of insurance that provides financial protection in the event that a professional is sued by a client for mistakes, errors, or negligence in their work. This type of insurance is typically purchased by professionals in a wide range of industries, including but not limited to:

When a professional purchases E&O insurance, they are essentially transferring the risk of a lawsuit from themselves to the insurance company. If a client sues the professional for errors or omissions in their work, the insurance company will pay for the cost of defending against the lawsuit, as well as any damages that may be awarded to the client.

What Does Errors and Omissions Insurance Cover?

The specific coverage provided by E&O insurance can vary depending on the policy and the industry in which the professional works. However, in general, E&O insurance can cover a variety of situations including:

Negligence or Errors in Services

One of the most common situations that E&O insurance covers is when a professional makes a mistake or error in their work that causes harm to a client. For example, a doctor who misdiagnoses a patient or a real estate agent who fails to disclose a property defect may be sued by the client for damages.

Breach of Contract

Another situation that E&O insurance can cover is when a professional breaches a contract with a client. For example, a financial advisor who fails to follow the instructions of a client may be sued for breach of contract.

Misrepresentation

E&O insurance can also provide coverage in situations where a professional provides false or misleading information to a client, which causes harm. For example, an accountant who provides inaccurate financial statements may be sued by a client for misrepresentation.

Legal Defense Costs

Finally, E&O insurance can cover the cost of legal defense, even if the professional is found to be not liable for the client’s damages. This can be especially important for professionals who may not have the financial resources to defend against a lawsuit on their own.

E&O Insurance in Texas

Every state has its own laws and regulations regarding E&O insurance, and Texas is no exception. Professionals in Texas who are considering purchasing E&O insurance should be aware of the following:

Limits and Deductibles

Like other types of insurance, E&O insurance policies have limits and deductibles. Limits refer to the maximum amount that the insurance company will pay for a claim, while deductibles refer to the amount that the professional must pay out of pocket before the insurance company will start covering the costs. Professionals in Texas should carefully consider their limits and deductibles when purchasing E&O insurance.

Licensing Requirements

Some professions in Texas require professionals to carry E&O insurance as a condition of licensure. For example, real estate agents and insurance agents are required to carry E&O insurance in order to obtain or maintain their licenses. Professionals in other industries may also be required to carry E&O insurance depending on their specific circumstances.

Lawsuits and Statutes of Limitations

Finally, professionals in Texas should be aware of the statutes of limitations for lawsuits related to errors and omissions. In general, lawsuits related to E&O must be filed within two years of the date that the client knew or should have known about the error or omission. However, there are some exceptions to this rule, and professionals should consult with an attorney familiar with Texas law to fully understand their rights and obligations.

FAQ

What professions typically require E&O insurance?

Professionals in a wide range of industries may benefit from purchasing E&O insurance. Some of the most common professions that require E&O insurance include: doctors, lawyers, real estate agents, financial advisors, and accountants.

Is E&O insurance required by law in Texas?

While E&O insurance is not required by law for all professions in Texas, some professions are required to carry E&O insurance as a condition of licensure. Additionally, many professionals choose to purchase E&O insurance voluntarily in order to protect themselves against potential lawsuits.

How much does E&O insurance cost in Texas?

The cost of E&O insurance in Texas can vary depending on a variety of factors, including the profession, the limits and deductibles of the policy, and the claims history of the professional. Professionals in Texas should carefully consider their individual circumstances when determining the cost of E&O insurance.

What should I look for when purchasing E&O insurance?

When purchasing E&O insurance, professionals should carefully consider the coverage provided by the policy, the limits and deductibles, and the reputation and financial stability of the insurance company. It may also be helpful to consult with an insurance agent or attorney who specializes in E&O insurance in order to fully understand the policy and its implications.