Reduce Your Company’s E&O Liability with Workforce Training

Humans make mistakes – that’s why companies need errors and omissions (E&O) insurance, also known as professional liability insurance. Since it covers financial losses, it is different from general liability insurance (which covers bodily injury and property damage claims).

E&O insurance protects companies and professionals against claims of negligence or inadequate work. E&O claims typically involve allegations of professional negligence, breach of contract, failure to meet a specific standard of care, failure to meet a deadline, or errors and oversights during the course of work.

Consider the following scenarios, all of which could lead to a claim:

• An accountant fails to file an important tax form by the deadline, resulting in penalties for the client.
• A real estate agent does not disclose a known problem about a property. The buyer doesn’t learn about the issue until after the sale is complete and then is forced to spend thousands of dollars to fix the problem.
• An AI development firm builds technology that does not meet the contracted specifications. The client’s product launch goes poorly, resulting in major losses.

Training Your Team to Prevent E&O Claims

E&O claims often come down to a mismatch between what the client expects and what the professional delivers. However, it’s also important to bear in mind that some claims may be groundless – when the company or professional has made no errors and committed no acts of negligence. Even baseless lawsuits can be expensive to defend. Worse, companies may still lose if they lack evidence to prove they did not shirk their professional duties.

Training can help professionals both avoid and defend themselves against allegations of negligence. Below are five essential training categories that can help reduce your organization’s E&O liability.

#1: Communication Training

Many problems can be solved with proactive communication. Communication can ensure that you know what the client expects and that the client knows what’s feasible.

It’s also important to discuss issues as they arise. For example, if a project turns out to be more time consuming than you anticipated, it may be possible to negotiate a new deadline with the client. However, if you don’t inform the client of the delay, the client won’t be able to prepare, which could lead to financial loss. This increases the likelihood of a lawsuit.

Communication is a learned skill, and it doesn’t come naturally to everyone. Therefore, it’s important to offer regular training to help your understand your communication expectations. By providing pointers and conducting roleplay activities, you can show your team when and how to communicate effectively. Be sure to include:

• Email etiquette, formatting, signatures, who to copy, and when to reply or reply all.
• Texting etiquette and policies.
• Situations that require more formal communication and escalation, as well as protocols and examples of the correct communication to deploy in each of these situations.
• Standardized templates and editing procedures.
• Understanding of what constitutes a commitment on behalf of the company and how to avoid overpromising.

#2: Documentation Training

Documentation may be the only thing that protects you from a lawsuit in the case of a dispute. Document everything from the initial agreement and the client’s expectations to the delivery of the service. It’s especially important to document anything that could lead to a dispute. For example, if a client rejects your advice, it should be documented.

The following steps can ensure your team is careful about documentation:

• Develop a system for documentation that includes what forms you’ll use and how you’ll store them.
• Train your team on documentation, including what to document, how to document it, and why it matters.
• Conduct regular audits to verify that your team is consistently documenting the relevant information.

#3: Contracts Training

Many E&O lawsuits involve a breach of contract, such as a missed deadline or failure to deliver services in accordance with the agreed upon terms. As contracts tend to be dense and filled with legalese, your team members may have a hard time understanding them. However, you still expect your employees to adhere to contract terms. Provide training on key clauses and what they mean for your team members and for your clients.  

#4: Industry Standards Training

Since E&O lawsuits sometimes allege a failure to meet professional standards of care, it’s important your team understands what these standards are. Instead of assuming everyone on your team knows and will adhere to professional standards, prepare training material relevant to your industry. Also, create a tracking system to ensure that everyone stay current with their professional continuing education requirements.

In addition to some initial training, you may need follow-up training:

• Watch for bad habits. Not all instances of professional negligence lead to lawsuits, but this doesn’t mean you should ignore any. Provide training to nip problems in the bud.
• Keep an eye out for issues in your industry. For example, learning about an E&O lawsuit against one of your competitors is a good opportunity for you to train your team on how to avoid a similar situation.

#5: Cybersecurity Training

Some E&O claims allege a failure to keep client data safe. If your team has access to your clients’ data, you need to take basic precautions to keep the data safe. If you don’t and a data breach occurs, you could face liability.

Train your team on cybersecurity best practices, such as password management and care of portable devices.

Need E&O Liability Guidance?

Workforce training can help your company reduce its E&O liability exposures. However, insurance remains a critical part of risk management. Heffernan Insurance Brokers can help you secure the coverage you need. We can also provide vital risk management resources.

Learn more.