What Are Common Enhancements On an E&O Insurance Policy?

Cyber
Any Tech E&O policy should also include first and third party cyber insurance. This would protect against liability from data breaches, accidentally sharing malicious code, and other computer related wrongful acts. It would also provide indemnity in the event of losses like business interruption, privacy breach notification costs, forensic expenses and others.
 
Broad professional services definition
Getting the underwriter to agree to a broad definition like “any services performed for a fee” opens the policy and leaves less room for claim denial. (Note: if you do get this coverage concession, be careful that it isn’t stolen right back via the exclusion section).
 
Automatic additional insured status
Not all contracts will require that the other party is added as an additional insured to your E&O policy but occasionally they do. The ‘automatic’ enhancement would give additional insured status to any third party that the insured has a professional services agreement with as long as that contract explicitly states that additional insured status is required. The carrier won’t offer the extension if there’s no contractual obligation for the other party to be added. It’s important that the contract passes muster as an “insured contract” (as defined in the policy) before confirming additional insured status.
 
Payment of withheld fees
If an insured has a client that they get into a dispute with, that client may decide to refuse to pay the insured the fees they’re owed for the service. If the insured then tries to recover those fees (i.e. has their lawyer send a scary demand letter), the client could turn around and file a lawsuit, thus elevating the dispute one step closer to an expensive, drawn out legal battle.

Put simply, this coverage extension says to the insured’s client: “if you’ll agree not to elevate this to that next level, we’ll throw enough money at the problem to make it go away.”

The long version: if the client is threatening to sue the insured for an amount greater than the fees owed to the insured, the carrier will step in and pay the insured those fees on the clients behalf. But there’s a caveat. If the carrier does this, the client has to confirm, in writing, that they agree to not bring a claim against the insured as long as the insured stops pursuing them for the fees.
 
Loss of documents
This coverage pays sums which the insured becomes legally obliged to pay (including liability for the claimants’ costs and expenses) as a result of a claim arising out of damage to the insured’s documents or documents in the insured’s care, custody or control.

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11/25/2024