If you run a small business in Canada, you almost certainly have insurance to cover the various worst-case scenarios that could put that business at risk. If you’re a freelance or self-employed professional, you also probably have some form of professional insurance to cover the almost inevitable complaint of a disgruntled former client. One type of coverage you may not have yet, though, is errors and omissions insurance. If you’re a professional who doesn’t have this kind of protection, you probably should.
Errors and omissions refers to the sometimes unavoidable charge of malfeasance or malpractice arising from negligence. Even or perhaps especially if you take exaggerated care to always do your best for your clients, one of them may claim that you acted improperly or discharged your duty in a negligent manner. If, for instance, your law firm has a client with complicated finances, that client may overload you with requests for money transfers and investments. It is potentially a violation of your duty to mingle some types of funds with others, and keeping it all straight can be beyond a small business-centered firm to manage. In this case, if the client later alleges negligent harm and sues for damages, your errors and omissions policy should have you covered.
The coverage this type of insurance offers can help your professional firm well beyond its nominal role in risk management; it can actually be a recruiting tool. If, for example, you run an accounting firm and are looking for new clients, letting prospects know that your firm is fully insured against claims of fiscal malpractice may set their minds at ease and encourage them to sign on with you. The draw here is not that something may go wrong and allow them to cash in but that if anything does go wrong, the dispute is likely to be resolved quickly, rather than forcing all parties into costly litigation. Full errors and omissions coverage can also make it easier to enter a partnership with another professional, in case you’re ever planning to expand in that way.