No business wants to think about what would happen if their company were to face a lawsuit or an insurance claim. However, it is not always possible to completely prevent being faced with an E&O claim. During the claims process it is extremely important to keep a level head, work alongside insurance providers, and thoroughly document everything to minimize the negative effects.
Without proper New Jersey Errors & Omissions Insurance, a claim could be incredibly time-consuming and costly, on both a financial and a reputational level. Here’s a closer look at what a claim will cost you.
There are two main monetary expenses you could face.
- Obviously, if there is liability found, you have a loss award that is recorded against the agency.
- The second is legal fees. Commonly, there are different deductible options available that determine whether the agency incurs any part of the legal expenses. Many customers choose the loss only deductible.
The average legal cost is approximately $12,000. If your agency has selected the Loss & Litigation deductible where you will incur some of the costs of litigation (in return for a premium savings), the legal expenses up to the limit of your deductible will now be your responsibility. Keep in mind that time is money.
When a claim is made involving a producer, that producer and potentially others will lose a lot of time that they could put towards their work as they prepare the necessary documentation to defend the business.
The anxiety faced by the individual is alleged to have made an error can be huge. A lawsuit against them exposes their vulnerability and can severely impact their confidence in how they do business. The cost of this is significant but difficult to measure.
When a business is faced with an E&O claim, insurers will work with the staff involved and agency principals to analyze the allegations and the account in question with it’s documents. If you have to go back a couple of years for documentation, the time commitment can be outrageous. During the discovery and litigation of the claim, there will be trips to the attorney’s office and court. Individuals involved will be interviewed by adjusters, attorneys and experts to determine whether your personnel acted in a professional and businesslike manner. Stress not only on the individuals involved but also for the entire office. An E&O claim can bring havoc to a business as it becomes the main topic of discussion. Employees may become paranoid to make sure that a claim does not happen to them. The mental distraction can be huge.
Your objective would be to show that your business did nothing wrong, shifting the liability elsewhere. It is impossible to determine the specific damage that could result from this but it’s likely to be significant. You could bet on adverse publicity on business when the community becomes aware of the issue.
The impact involves much more than dollars. If you add it all up and the cost in lost productivity, stress, and more, the damage can be quite tremendous. Take the time to avoid claims now because it just might save you time and money later.
About SB One Insurance Agency
At SB One Insurance Agency, we have served the businesses and residents of New Jersey, New York and Pennsylvania for more than 60 years. We are a wholly owned subsidiary of SB One Bank, the region’s premier banking institution, and we are prepared to offer you personal, business, employee benefit, and risk management solutions. To learn more about our coverage options, contact our specialists today at (888) 990-0526.