Every TAS Needs Errors and Omissions Insurance

But Not All E&O Insurance Policies Are the Same

As individuals and businesses, we purchase insurance policies to protect us from loss. Personally, we insure our home and cars, our life and our health, along with other things. For our answering service, we insure our building and its contents, to start with. Then we add a general liability policy. But for a telephone answering service, especially in this litigious society, a general liability policy isn’t enough. We also need an errors and omissions insurance policy, E&O for short.

What is E&O Insurance?

As the name implies, E&O insurance provides a degree of financial protection from mistakes that happen when we serve our clients. Most notably this includes errors that our staff may make. That’s the E part of E&O. The O stands for omissions, which provides a degree of financial protection for acts of omission, that is, failing to do what we should have done.

Some people divide this into “errors of commission” and “errors of omission.” That is, doing the wrong thing, as well as not doing the right thing. Both types of errors can cause problems for our clients and may entice them to sue us—or threaten to sue us—for an error or omission.

People Make Mistakes

Answering services are staffed by people, and people are human. They make mistakes. True, our staff does the right thing on most every call, but it’s not the 99 percent that we do correctly that earns our clients’ respect. It’s that 1 percent where we might fall short that garners their ire.

Of course, we can minimize this with good training and mitigate it with good customer service. But even good training and good customer service can’t eliminate the reality that errors do occur. It’s part of being in the answering service industry.

Don’t Risk Not Having Coverage

Some answering service owners have decided to go bare and skip the E&O insurance policy. They’ve made a business, or a financial, decision to forgo coverage; they hope an angry client who wants reimbursement or revenge will never sue them. Or if someone does sue them, they hope it’s something they can deal with.

Making this decision to not buy E&O insurance coverage may save them a little bit of money each year, but it also puts their entire business at risk, along with their future financial well-being and that of all their employees. One small E&O incident could capsize an answering service, and one large one would sink it. From this there is no recovery.

Include HIPAA Coverage

Though the items included in an E&O policy vary, common elements include defense costs, errors made by temporary workers and subcontractors, and personal injury, such as libel or slander. Policies can also cover both actual and alleged negligence, as well as address both claims and associated damages. (Not covered are things such as HR issues, fraud, injury, and property damage; these require a different type of policy.)

As an answering service, it’s also important to make sure the E&O policy includes protection from HIPAA violations. HIPAA regulations are a growing concern for answering services that handle healthcare clients, but even those who don’t take on medical accounts, may still dip into an area covered by HIPAA. Fines for HIPAA violations are expensive, ranging from $100 to $50,000 per violation (or breached record) with a maximum penalty of $1.5 million per year.

Few answering services could survive that type of financial hit on their own. Make sure your E&O insurance policy includes a HIPAA provision.

Conclusion

Not having E&O insurance may save some money for the short-term, but it opens uninsured answering services to a huge liability that could cripple their operation. Even one small E&O claim could more than pay for itself, while one large incident will mean the difference between shutting down and staying in business.

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