Stop Treating E&O Like Jan Brady of the Brady Bunch
Fans of the Brady Bunch will understand that cyber insurance has become the Marcia Brady of the property & casualty insurance market, as all one hears is “Cyber, cyber, cyber!”
Professional liability/errors and omissions (E&O) coverage is more like Jan — the middle sister who doesn’t get enough attention.
Like eldest sister Marcia in the Brady household, cyber risk has taken much of the headlines. A day does not go by when one does not read about a ransomware attack or an IT supply chain concern. This has led to a challenging cyber market, with significant adjustments to terms and pricing.
However, while the focus for organizations may be on cyber insurance coverage, E&O should also be top of mind.
Errors & omissions losses can impact not only the balance sheet but also the reputation of a company. Any company offering a miscellaneous/technology service or technology product to customers has E&O risk — an act, error or omission in the provision of that product or service could result in liability to the organization.
Cyber and E&O coverage are, as a matter of practice, offered as a blended insurance policy.
Should an organization offer a product/service impacted by a network security breach and/or associated business disruption, the resulting third party claim against the organization will likely be one alleging an error or omission in the product or services offering.
E&O coverage is a subtle art, and the nuances require that brokers understand contracts, including limitations of liability and contractual indemnity provisions. More importantly, to craft appropriate E&O coverage, a thorough understanding of the products and services offered by the company is required.
Additionally, brokers need to determine if any standard policy exclusions may preclude indemnification under the policy based on the specific product or service offering and hence require amendment.
Lastly, it is important to consider how an organization intends to offer remedies to its customers in the event of an error or omission and how insurance can play a part in the process.
Given the increasing digitalization of organizations and the expanded use of analytics, companies that are not typical “technology” or “professional services” may unwillingly be introducing errors and omissions exposures to their organizations that may not be insured.
This new or additional risk could come via acquisition or through organic growth of services and the product offering. Therefore, any placement discussion should also include a discussion of current and future products and services and whether new or expanded E&O coverage is warranted.
E&O is not a “one size fits all” coverage. It is nuanced and complex, requiring expertise to ensure that the insurance policy performs as intended.
The devil is in the details of E&O policies, and any broker should abide by the ethos of “know thy client.” Here’s to hoping that the “middle child” E&O gets more of the much-needed coverage spotlight. &