As an accountant in the greater Ontario area, you probably often find yourself dealing with 6 and 8 digit figures. However, as you know all too well just one little simple miscalculation on your part can throw the all the calculations off. A miscalculation could make it look like your client’s company has more money coming in than it actually does, which may eventually lead to overspending. While you are probably already familiar with business liability insurance, which protect you against property damage and bodily injury, you may not be familiar with error and omission insurance.
Error and omission insurance is also known as professional liability insurance. It covers public service providers, in the event that they make professional mistakes or accidentally overlook something. The above scenario is a perfect example of when professional liability insurance would come in handy. While error and omission insurance may seem more like a nuisance than a necessity at first, as an accountant this type of coverage can come in handy, and without it, you can potentially face dire consequences.
Facing Court Costs And Lawyer Fees
Error and omission insurance can be helpful, when you find yourself in a court of law disputing a claim. Even if your work is found up to par and all of your calculations were exact, just imagine all the time that would be spent in court disputing this claim. Sometimes these types of cases can last months and even years. The lawyer fees and court costs alone could cause any single-man operation or small company into bankruptcy. However, with the right errors & omissions insurance ontario policy, you wouldn’t have to worry about paying these fees, because the policy would cover all the court and lawyer costs, along with the settlement.
If you are found at fault, which sometimes happens, the policy will still cover your litigation fees, as well as the settlement costs. However, you need to keep in mind that the total judgment amount depends on how much coverage you have. If the total amount of the ligation fees and settlement exceeds your coverage limitations, you will have to end up paying out of pocket for the rest. So, not only is error and omissions insurance important, but the amount of coverage that you have is important, as well.
Any type of claim, filed by a client or customer can ruin a company’s reputation. When a customer files a claim against a company, it can have negative effects and it does not matter if the claim is legitimate or frivolous. If the issue can be resolved with a few tweaks, it will be in the accountant’s best interest to resolve the issue as soon as possible. Of course, this is not always the case, because one minor calculation error could potentially cause a client to lose a lot of money. Most accountants will not have the funds on hand to cover the reimbursement cost, so the client will hire an attorney and file a lawsuit.
If the judge finds in favor of the complainant, the accountant will be left in a devastating mess. This finding will ruin the accountant’s reputation and potentially their business. Consumers will refuse to do business with an accounting firm that has a poor reputation. In fact, the court case and decision will probably end up in the local newspaper and on the local news network. It is extremely difficult to overcome such a tragedy, but not if you are covered with errors and omissions insurance.
When one thinks of a lawsuit, they do not give much thought to the litigation fees. The defendant in a lawsuit will need to hire the best lawyer they can afford. Of course, litigation fees are not cheap, but can run anywhere from $200 up to $1,000 an hour. This is money that most people do not have on hand. However, as a business owner, you will need to do whatever is necessary to hire the best attorney possible. When you combine the settlement, judgment and litigation fees together, this will be a large lump sum of money. If the accountant is not covered under an E&O insurance policy, they will be forced to pay these costs out of pocket.