Businesses often rely on errors and omissions insurance to address the financial liabilities that could arise from a claim opened against the organization. These claims deal with negligent acts or situations where accidental errors or verbal or written omission created a financial loss for the party filing suit. Within the financial industry, there are many exposures and risks in the area of errors and omissions.
Professional Liability Concerns
E&O in finance may also be referred to as the professional liability for an institution. The roles and organizations susceptible to these risks include:
- Credit unions
- Asset management
- Insurance companies
- Hedge funds
- Investment advisors
- Private equity or venture capital firms
If a consumer isn’t happy with the services that have been rendered, a claim might be opened against the institution under the category of errors and omissions. These claims are not the same as criminal activities, fraud, cyber exposure or employee misconduct. However, the coverage under E&O can extend to the financial instruction for defense costs, settlements ordered by the court, damages and other potential costs associated with a lawsuit.
An act of error or omission doesn’t have to occur for a claim to be filed. Any claim that alleges a negligent act took place will cost thousands to either settle or disprove. Carrying E&O insurance is a necessity for financial institutions.