The risks of not carrying enough E&O insurance can be “astronomical,” says Roberta Tasson, vice president, corporate risk, with Toronto-based the Magnes Group Inc. Below are examples of risky behaviour you should avoid:
Letting Your Policy Lapse. You might assume that past mistakes will be covered by the E&O policy that was in place at the time the error occurred. That is a big mistake, Tasson says. If you receive a claim today for a service you rendered three years ago, it is the insurance policy in place today that responds, she says: “If you have no valid insurance today, you have no coverage.”
Non-Disclosure. If you misrepresent anything on an E&O insurance applica-tion, the policy is considered void from inception, says Tasson. That error probably won’t be discovered until it’s too late and a claim has been made, leaving you vulnerable to some serious financial repercussions.
Late Renewal Of A Licence Or Registration. Most E&O policies require that you have an active licence or registration for coverage. Licensing or registration must be consistent and in force for coverage to apply, Tasson says. Let either lapse and your E&O policy is void.
Cancelling Your Insurance For A Leave Of Absence. Taking extended time off does not mean you should cancel your E&O insurance, Tasson says. You can be served with a statement of claim while you are on leave.
Skipping The ERP Option. Most financial advisors don’t bother buying “extended reporting period” coverage when they retire. If you’re not covered in retirement, you could be vulnerable to a claim and everything you have worked for can disappear in a flash, says Harold Geller, a lawyer with Doucet McBride LLP in Ottawa: “Why would you not protect yourself from future risk?” — WENDY CUTHBERT