A common misconception is that doctors and lawyers are the only professionals who need errors and omissions (E&O) insurance. In fact, almost every organization that provides a service to a client for a fee is exposed to E&O, and because professional requirements are broadly defined in legal terms, professional liability insurance protects companies from the unforeseen.

Errors and omissions insurance, also known as professional liability insurance, protects organizations or individuals against claims of professional negligence through a variety of professional services. This includes errors or omissions that were actually made by the company or perceived by the customer to have been made. Claims for errors and omissions are not covered by general liability insurance.

Insurance for tax preparers

Errors and omissions insurance is particularly important for certified public accountants, bookkeepers, and tax preparers. Every year in the US, thousands of lawsuits are filed against tax preparers and bookkeepers, and in the wake of almost every corporate scandal, new lawsuits emerge.

For bookkeepers, tax preparers, and accountants, the tax and audit landscape is constantly changing. Clients trust these professionals to be up-to-date and accurate, but no matter how polished a tax preparer or accountant is, and no matter how fluid their risk management procedures are, mistakes will happen.

For example, if a client is audited on their tax return and, in fact, there is an error resulting from a simple calculation error on the part of the tax professional, the tax professional would be responsible for any penalties and interest assessed by the tax professional. IRS that the customer was charged. . Also, if the preparer overlooked or failed to include the information provided by the client, they would also be at fault. Even if a client did not provide information to the tax professional and later filed a frivolous lawsuit, the tax preparer would still have to pay potentially exorbitant legal fees to defend themselves.

Even the smallest errors can cause substantial problems for clients, and without errors and omissions insurance for tax preparers, a business or individual may not be able to survive even a single claim filed against them.

Bookkeepers require coverage too!

Similarly, the bookkeeper’s errors and omissions coverage would protect the bookkeeper in similar situations where figures may have been miscalculated or information omitted, regardless of whether or not it was his fault or the fault of his customer.

History has shown that when a major corporate scandal is uncovered, racketeering lawsuits against accountants typically increase. According to an article published by the Manhattan Institute for Policy Research, in the late 1980s, in the midst of the Securities and Loan debacle, damage claims against accountants were estimated to be between $1 billion and $4 billion, a figure that reportedly exceeded the net worth of all accounting firms combined (Lawson & Olson). While some were involved in wrongdoing, others were renowned professionals. While a spate of litigation of this magnitude may never be repeated, it is a risk that E&O insurance for accountants will protect against.

Most E&O policies will cover lawsuits, settlements, and defense costs, even in cases where the allegations are found to be frivolous. Without errors and omissions insurance, the cost of paying settlements and court fees would leave many bookkeepers, accountants, and tax preparers deep in debt or even bankrupt.