What Happens When a Professional Mistake Becomes a Legal Problem?

In a way, those first few years of running a business are all about making mistakes and learning from them. By that, we mean you’re inevitably going to encounter some unexpected challenges, whether those are budgeting missteps or staffing issues, but these aren’t necessarily bad experiences that will set you off-course. 

On the contrary, making mistakes can provide valuable lessons that help you refine your strategies, giving you a better understanding of the business environment and what it takes to succeed. 

But what happens when one of those mistakes can’t simply be ‘moved on’ from? In other words, what happens when a professional mistake becomes a legal problem, and rather than helping your business grow, it threatens to derail it entirely?

Safeguarding Against Your Mistakes

The answer isn’t: hide yourself away and hope that the problem eventually disappears. It’s not going to disappear, and that’s why something like small business errors and omissions insurance has become such a go-to for companies with a forward-thinking ethos. 

Make no mistake, professional mistakes become legal problems far more often than you might think. According to a recent report, small companies face 12 million contract lawsuits annually, with 90% of businesses expected to be sued at least once in their lifetime. 

This can be for a wide range of reasons, whether it’s miscommunication with a client, or failing to deliver a promised service on time. It could even be for administrative errors in contracts or misleading statements in advertising. 

The point is that a professional mistake can quickly escalate into something more damaging, and that’s why E&O insurance has become so popular over the last few years.

What Is An E&O Policy?

As for what an E&O policy is exactly, it’s essentially a type of professional liability coverage that can protect your business from claims related to mistakes or negligence. 

Let’s say you’ve been hired as a marketing consultant to create an advertising campaign for a client. You design a campaign based on the information provided, but due to certain miscommunications, the campaign contains inaccurate claims about the client’s product. As a result, the client loses sales and decides to take legal action against your business for the damages you’ve caused them. 

In this scenario, an E&O policy would help cover the legal fees, court costs, and any settlements or judgments that arise from the claim – and this is hugely important when it comes to both your future success as a business and your current capacity for growth.

Protecting Your Confidence

If one of your professional mistakes becomes a legal problem, it’s not just the legal fees and settlements that will do damage, it’s the effect on your own confidence and decision-making. 

The anxiety alone about getting something wrong and potentially facing a claim can make any business second-guess their choices, leading them to hesitate on new projects or potentially even avoid opportunities altogether. 

Over time, this loss of confidence can then slow innovation, reduce your productivity, and limit your willingness to take the calculated risks that are essential for success. 

In this way, E&O insurance can be the safety net you need to move forward with confidence. Just knowing that a single mistake won’t devastate your finances or damage your reputation makes it far easier to experiment and innovate, effectively cutting out the fear and anxieties associated with failure and replacing them with clarity and assurance. 

Of course, making professional mistakes that could lead to legal repercussions is still something you want to avoid, but as we mentioned earlier, a lot of the time they’re inevitable. Mistakes are the consequence of pushing your business forward, and they often come from trying new strategies and expanding into unfamiliar markets. 

A business that is forging a path to success is one that is taking more risks. If that’s your business, you want to know it’s covered should anything go wrong or escalate.