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E&O Insurance Coverage FAQs

Fri Oct 30th, 2020 on     FAQs,    

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Errors and omissions (E&O) insurance is a necessity for many professionals who engage in high stakes work that could lead to third-party misconduct claims.  For example, a real estate broker may find it necessary to purchase E&O insurance, as they could be on the hook for damages if they sell a house and fail to disclose certain construction defects that would be relevant to the new homeowner.

Mistakes happen.  Though you may be a high-performing professional who does very well relative to the competition, flawless performance is not realistic.  E&O insurance coverage is meant to cover those “gaps” in performance that could lead to a professional misconduct claim for damages.

The problem is that E&O insurers often refuse to “step up to the plate” when a claim is brought.  The insurer may deny the claim and argue that they have no duty to defend you in the underlying litigation.  This can be quite a shock — after all, you were relying on the insurance company to take steps to protect you from harm.

Professional misconduct accusations can be frightening, overwhelming, and disruptive to one’s life and reputation.  Here at Ver Ploeg & Marino, P.A., we understand just how frustrating it can be to navigate these complex emotional and professional issues while the insurer you were supposed to be able to rely on is refusing to provide the support you need.

It is important to us that we resolve your claim efficiently and effectively.

Our team of experienced Miami insurance law attorneys represents policyholders — including professionals who are being sued for malpractice and other forms of negligence — in a variety of disputes with their insurance providers.  We take pride in working closely with our clients to ensure that their goals, preferences, and concerns are prioritized every step of the way.

Interested in speaking to a member of our team?  Contact us today to request a consultation.

Frequently Asked Questions (FAQs)

Q: A third-party malpractice claim was brought against me before I purchased E&O coverage from my insurer.  Will my E&O policy apply to that claim?

A: It depends on the terms of your E&O policy.  Many E&O policies are “claims-made” and therefore only cover claims that were made during the policy period — as such, a claim brought before the policy period would not be covered.

There are some E&O policies that have less strict requirements and may cover claims that occurred prior to the start of the policy period.  We encourage you to consult our team of experienced Miami insurance law attorneys for an evaluation of your policy (to determine the procedural requirements and limitations).

Regardless, it is important that you serve notice of the claim to your insurer as soon as possible.  With a claims-made policy, for example, if you fail to provide notice to your insurer before the policy period ends, then you will lose your right to secure benefits.

Q: If I was intoxicated on-the-job, leading to the professional misconduct for which I am currently being sued, will my E&O policy cover it?

A: Every policy is different — some E&O policies are much more comprehensive than others — but yes, as a general rule, professional misconduct caused by intoxication (and other reckless or intentional misconduct) is not covered by most E&O policies.  Most E&O policies only provide coverage for negligent conduct.

Now, whether you were intoxicated is a separate question that is likely to be the centerpiece of the dispute.  Suppose that you only had one drink and were not intoxicated at all.  Your insurer may attempt to argue that you were intoxicated, as they were successful in doing so, they would be able to avoid having to payout.

Q: If the underlying lawsuit is not likely to succeed, does that mean that the insurance company does not have a duty to step in and defend me?

A: No — insurers have a duty to defend even if the underlying litigation is unlikely to succeed.  In fact, the “likelihood of success” should have no bearing on whether the insurer has a duty to defend you.

Oftentimes, insurers will attempt to argue based on the available facts.  They may argue that — looking at the facts — it appears as though the third-party misconduct claim would not actually fall within the policy’s coverage.  This is a failed argument, however.  In the state of Florida, an insurer’s duty to defend is based on the allegations from by the plaintiff, not on an early interpretation of the facts.

So long as the plaintiff made allegations that could potentially fall under the policy’s coverage, the insurer has a duty to step in and defend the policyholder in the underlying litigation.  Even if the allegations later prove to be false or otherwise unjustified, that does not relieve the insurer from their duty to defend.

Q: Is the duty to defend different from the duty to indemnify?  In other words, if the insurer steps in to defends me in the underlying litigation, does that mean they also have to pay out?

A: E&O insurers have a duty to step in and defend you in the underlying litigation if there is potential for coverage under the policy (i.e., if the allegations contain claims that would be covered by the policy).

This duty to defend is broader than the insurance company’s duty to indemnify (i.e., to pay out benefits under the policy).  It’s a relatively simple proposition: the insurance company may be required to defend you in the underlying litigation, but if it turns out that there are no covered claims, or if the covered claims are unsuccessful, then the insurer has no duty to payout benefits.

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