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Commercial Errors & Omissions Liability
 

Despite your best effort and hard work, a dissatisfied customer may sue you, alleging mistakes were made. Sometimes the mistakes aren't even made by you but by a subcontractor you hire. These errors can result in serious financial loss to your client or other third parties.

In today's business world, companies providing products or services to third parties need protection beyond their general liability (GL) policies. Among other perils, standard GL policies respond to claims or lawsuits made by third parties for bodily or physical injury to, or loss of use, of tangible property. However, due to the impaired property exclusion, GL policies do not provide protection for claims when the insured's product fails to perform without physical damage accompanying that failure. In addition, GL policies do not respond to claims for injury to intangible property, such as damage to data. Without Errors & Omissions (E&O) insurance, other financial losses suffered by one of your customers can be detrimental to your company's bottom line.

Errors & Omissions liability insurance provides essential protection to help you protect your assets when standard GL insurance does not. Chubb's E&O policy picks up where the GL contract leaves off and can protect you against claims for financial injury that allege your product failed or that allege you failed to perform services. Errors & Omissions insurance applies not only to your obligation to pay damages, but also to the costs incurred to defend you.

Companies at Risk
Companies that should purchase Errors & Omissions insurance include those that:

  • Manufacture, assemble or install to customer specifications
  • Provide design work
  • Select raw material for others
  • Provide services, advice or instruction to others for a fee
  • Subcontract work
  • Print, package or deliver materials for clients

Product Features

  • Protection includes claims resulting from wrongful acts by or on behalf of the insured.
  • Broad definition of "your product," including goods or products you manufacture, sell, handle or distribute. Protection is not specific to a particular industry segment.
    Select raw material for others
  • Broad definition of "your service," which provides protection for services beyond your usual scope of activities. "Your service" is defined to include activities such as related consulting, staffing, training and other support services.
    Subcontract work
  • Expenses incurred by the insured at our request and pre-and post-judgment interest are supplementary payments, which preserves your limit of insurance for damages and claim adjustment expenses.
  • Our notice of circumstances condition allows you to preserve insurance for adverse circumstances that have not yet resulted in a claim against you.
  • Coverage can extend anywhere in the world, including suits brought outside the United States.
  • Extended reporting period for a three-year time period, allowing you the option to preserve insurance in the event your policy is cancelled, nonrenewed or otherwise discontinued.
  • Significant limits available in one policy form.

Why would a company need Commercial Errors & Omissions Insurance? Consider the following scenarios:

A tool and die shop created a mold to be used to make an engine part. However, the mold was not built to specifications. As a result, the tool and die shop's client could not manufacture the engine part by its deadline and sued the tool and die shop for lost revenue and expenses. Damagers were $750,000, and expenses cost $65,000.

A name-brand clothing manufacturer subcontracted the manufacturing of a new line of children's clothing to a facility in Central America. The clothing line was sold to retail stores on the West Coast. Upon receiving numerous customer complaints about clothes shrinking after being washed, it was determined that an incorrect care label was sewn into the clothes. Two of the retail stores sued the clothing manufacturer for lost revenue and expenses. Damages were $500,000, and expenses cost $35,000.

A printing company printed and packaged hair accessories for a customer. The adhesive used to seal the packages failed, causing the product to fall out of its packaging when displayed. The printing company was sued by its customer for lost revenue and expenses. Damages were $255,000, and expenses cost $55,000.

Service and Strength

Chubb's reputation for outstanding service is built on a consistent track record of performance by its global network of loss control and claim professionals. Our Loss Control Services risk engineers are experienced in making risk assessments and proposing practical remediation to help mitigate or prevent losses. Should a loss occur, our exceptional claim service is available anytime/anywhere in more than 140 languages through a toll-free number or via the Internet.

Our financial strength continues to earn high ratings from A.M. Best, Standard & Poor’s and Moody’s, leading evaluators of insurance companies. Financial strength, combined with our underwriting expertise and claim service, means you can count on Chubb to be there when you need us most.

 

Additional Information 

 

 

Learn more about:

  • Chubb's products - Please contact your insurance agent or broker; use our Find an Agent tool to locate an agent or broker near you.
  • Claims - Please go to Chubb's Claims Services.
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