Strategies for reducing your E&O risk

Facing an E&O claim is a lot like an IRS audit. It’s time-consuming, stressful and something you really want to avoid. In today’s litigious business environment, it’s important to review some of the most effective ways to reduce your E&O risk as well as provide a strong defense in the event a claim is made against you:

Obtain E&O insurance coverage. For many types of business professionals, having errors and omissions (also called professional liability) insurance is critical. In today’s world, you can be the subject of a financially devastating legal claim at any time.

Keep information about each client in a separate file. Include and summarize all interactions with each client via phone, e-mail, text and in person.

Summarize every client conversation and meeting, including phone calls. Include the day and time of the interaction, the name of the client and what was discussed. Don’t skip logging a call because you think it is trivial. Every interaction could be important in the event of an E&O claim or in court proceedings.

Make sure you’re documenting the advice you provide. When a client asks you for advice, include information in their file about what they asked you, what guidance you provided them and what action was taken as a result. If a client elected to not take the advice that you recommended to them, make sure that’s documented as well. Many E&O claims stem from instances in which a client doesn’t take a recommended course of action or says they were given incorrect information.

Keep up with your record keeping. Contemporaneously prepared documentation is best. Documentation should be as thorough as possible given time and resource constraints. Notes are considered especially credible evidence of conversations in the event of a legal claim. You can put information together months or years later, but it won’t be as accurate or credible.

Use your words carefully. Respond to your client as if your conversation is being recorded. Be precise and thorough in every text, e-mail, letter, in-person visit or phone call. Think twice about calling yourself an ‘expert’.

Use follow up letters/e-mails. If the conversation is an extremely important one, you may want to provide a summary of what was discussed in a follow-up letter or e-mail to your client. Documentation, when consistently created, will not guarantee that a claim will be settled in your favor. It will, however, give you the best defense possible.