Accountant Professional Liability Insurance

Accountant Professional Liability Insurance, also known as Errors and Omissions (E&O), is a crucial type of coverage for accountants. This insurance protects against claims of negligence, errors, omissions, or malpractice in the services provided. Given the nature of accounting and tax preparation work, where even small mistakes can lead to significant financial consequences for clients, having Accountant Professional Liability Insurance is essential.

General Liability

Professional Liability

Workers Compensation

Bond

Key Features of Professional Liability Insurance for Accountants

Coverage for Errors and Omissions

What It Covers: Mistakes, inaccuracies, or oversights in financial statements, tax filings, audits, or any other professional services provided by the accountant. This could include mathematical errors, missed deadlines, or failure to comply with relevant accounting standards.
Example: An accountant incorrectly calculates a client's tax liability, leading to a larger tax bill than expected. The client sues for the difference and the penalties incurred.

Defense Costs

What It Covers: Legal fees and court costs associated with defending against a claim, even if the claim is groundless or frivolous. Legal defense can be expensive, and this coverage helps ensure that the accountant does not have to bear these costs out of pocket.
Example: A client accuses an accountant of providing poor advice that resulted in a financial loss. The accountant's professional liability insurance would cover the costs of hiring an attorney to defend against the lawsuit.

Settlements and Judgments

What It Covers: If the accountant is found liable, the insurance will cover the amount of the settlement or court-ordered judgment, up to the policy limits. This can include compensatory damages awarded to the plaintiff.
Example: An accountant fails to detect significant errors in a client’s financial records during an audit, leading to an inflated valuation of the company. When the error is discovered, the client sues for damages, and the court orders a substantial payout.

Coverage for Breach of Duty

What It Covers: Claims arising from the accountant’s failure to meet the standard of care expected in their profession. This could involve failure to act in the client’s best interest or to provide services that meet professional standards.
Example: An accountant gives advice on tax structuring that later proves to be illegal or inappropriate, resulting in a lawsuit from the client for breach of duty.

Exclusions

What It Does Not Cover: Intentional wrongdoing, fraudulent acts, bodily injury, property damage (these are typically covered under general liability), and certain other specific exclusions. It's important to understand what is and isn't covered under a professional liability policy.
Example: If an accountant intentionally commits fraud, professional liability insurance would not cover the legal costs or any resulting penalties.