The difference between general liability and errors and omissions insurance will mark the difference between paying thousands or millions of dollars in lawsuits or having a cushioned legal defense!
If you don’t understand both policies properly, you might not use them to your advantage appropriately.
Here is a small introduction of General liability insurance to understand the difference. As the name says, it protects from general lawsuits like slip and fall, property damage, etc.
While errors and omission insurance protects professionals from lawsuits occurring due to erroneous work.
So, to understand the subject accurately, let’s see both the insurance types in detail!
General Liability Insurance: What Is It And How Does It Work?
General Liability insurance protects a business or a professional from ‘general’ claims, including bodily injuries, property damage, and, most importantly, advertising injury.
It is also known as Business Liability insurance as almost every business needs this insurance to survive and maintain its business continuity.
Here is a rundown of what general liability covers.
What Does General Liability Insurance Cover?
#1: Bodily Injury
General liability insurance can pay for the legal costs in a lawsuit and the third party’s medical care.
A customer gets injured or has an accident at your business; he may sue your company for medical care. General Liability insurance provides a cover against this kind of medical cost and legal expense.
#2: Damage to property of customer or business
This policy will also protect you if you damage your client’s property while at work. Should the client decide to sue you and the damage repair costs, it will cover legal fees.
For example, you are an interior designer. While implementing the design, you damage the walls of your client. If the client sues you, you are protected. Difference Between General Liability And Worker’s Compensation Insurance.
#3: Slander Or Libel
You can be sued if you defame a third party or business in verbal or written form. The insurance company will pay for the legal costs and any settlement and judgment in such cases.
For example, you say something false about your competitor’s brand on the radio. This can lead you to a lawsuit. But general liability insurance covers you!
#4: Advertising injury
Sometimes legal trouble arrives due to copyright infringement. In such cases, the insurance provider pays for the legal costs.
For example, a photographer can sue a business if he feels that his photographs have been used for an ad shoot without his prior information.
Errors and Omissions Insurance: What Is It And How Does It Work?
Errors and Omissions insurance covers mistakes or erroneous work by professionals. Humans err. It’s natural. But some errors can lead you into lawsuits. These could be thousands or million-dollar cases.
E&O insurance helps you pay for the legal costs of such hefty lawsuits.
Here are all the areas Errors and Omissions insurance covers.
What Does Errors and Omissions Insurance Cover?
#1: Mistakes And Oversights
It is indeed possible to deliver erroneous work to the client, which causes him reputational or financial loss.
For example, you are a bookkeeper and maintain the accounts of a company ABC. But you leave an error in excel, which causes ABC to incur a heavy financial loss. Now, if ABC sues you, E&O will protect you!
You do not always need to be entirely wrong to be wrong! I mean that negligence doesn’t mean you left an error, but that you did not achieve the mark you were supposed to.
Let’s say you are a social media marketer. You promised your client 10k subscribers by the end of the month. But could achieve only 7k. Now, if your client sues you, you are protected with an E&O policy!
#3: Undelivered Services
You promise to deliver a product or service but fail due to unforeseen reasons. Then if any lawsuit arises, E&O insurance protects you and pays you for the legal costs.
For example, you promised to deliver 50 tonnes of steel to another company. But could provide only 40 tonnes. This leads to a lot of financial and reputational loss to this other company because it could also not keep its word to other companies. Now, if this client of yours sues you, you are protected!
#4: Missed Deadlines
You said you would deliver a particular service by a specific time. But you fail to! E&O insurance protects you if you are sued for this reason and covers all the costs of the lawsuit!
For example, you were supposed to fill the Income Tax Return of a prominent business owner. But you contracted COVID-19 and could not fill the return.
This leads to many fines to this businessman, and he files a lawsuit against you! But if you have an E&O policy, you need not worry.
Difference Between General Liability & Errors And Omissions Insurance
As we just saw in detail, General Liability insurance covers the costs and expenses related to any damage to property and bodily injuries, etc. These might occur due to the company’s products, operations, and services.
On the other hand, Errors and Omissions insurance covers the costs and expenses arising out of any erroneous work. When a client files a lawsuit against a company for any mistake or faulty work, Errors and Omissions Insurance bears all the legal proceedings’ costs.
In A Nutshell…
Both General Liability and Errors and Omissions Insurance are strong morale boosters for businesses and professionals. As accidents can happen anytime, and anybody can make mistakes, but when these things blow up, they can take the shape of massive suits that can drain all your resources.
But thanks to both these policies, professionals and businesses can continue work and focus on their progression plans!
I see insurance as an investment. It saves a lot of trouble at a marginal cost.
So, I wrap up now, and I hope this was an informative post. If you have any queries, drop them in the comments box below!
I am all ears and waiting!