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Accountants Errors and Omissions (E&O)

Everybody makes mistakes. But sometimes those mistakes can end up being costly. When the loss of a client is brought to court and an auditor is partly at fault, they can be on the hook compensating the damage. Even if the auditor is only found to be 5% at fault, and the second party is found to be 95% but is insolvent, the auditor is responsible for paying back the entire loss.

Burns & Wilcox, a leader in excess and surplus insurance, can connect you with Accountants Error and Omission (E&O) coverage. By partnering with top insurers, Burns & Wilcox can provide access to the most comprehensive and relevant coverage for accountants in the event they make a mistake that leads to financial or reputational loss for their clients.

Coverage Details and Features

Details

  • Minimum premium starting at $600
  • Various limit options available
  • $10M primary capacity
  • Broad definition of professional services
  • Claims-made coverage
  • Duty to defend policy
  • Worldwide coverage
  • Standard and non-standard capabilities
  • Deductible starting at $1,000

Features

  • Various limit & deductible options
  • $10M primary capacity & excess capabilities
  • Worldwide coverage available
  • Claims made – Duty to Defend policy
  • First dollar defense available
  • Broad definition of professional services
  • Extended reporting period available

Optional Enhancements

  • Multi-year policy option
  • Excess coverage
  • Aggregate deductible
  • First dollar defense available
  • Employment Practices Liability Defense Coverage
  • Non-profit Directors & Officers Defense Coverage
  • Real Estate Agent Professional Liability
  • Insurance Agent Professional Liability

Claims Examples

Business Valuation
The owner of a successful insurance agency was getting close to retirement, and his children showed no interest in taking over the business. He hired his accounting firm to do a business valuation in preparation for the agency’s sale, but was disappointed with the figure it came up with. Nevertheless, he was anxious to retire and sold the agency quickly within the valuation range. Several months later, with time on his hands, he talked with a former competitor and learned that agency had sold for a significantly larger amount. Buyer’s remorse set in and he filed suit against his accountant, seeking the difference between the price he got and the one he felt he deserved. Though the accountant’s valuation was upheld, he incurred significant defense expenses.
Municipal Audit
Seemingly simple audits should not be perfunctory. For more than 20 years, a personable, trusted city comptroller operated an embezzlement scheme, where she transferred city money from account to account, and ultimately into a fictitious “sewer development” account in a separate bank. Over the years, her “personal appropriations” exceeded $50 million, a substantial portion of the city’s budget. There were no financial controls in place to prevent or detect the fraud, and she was skillful at evading questions and creating invoices to justify inconsistencies. The out‐of‐state accounting firm that audited the city’s books ultimately paid the city more than $35 million and the local solo practitioner, who had signed off on the annual audit for the last seven years, paid $1 million.
Mergers & Acquisitions
Accountants usually play a pivotal role in mergers and acquisitions, and whenever there are winners and losers, losers often cry “foul” with a lawsuit aimed at accountants. In one case, former officers of a merging company charged the acquiring company’s accounting firm with securities fraud and conspiracy to defraud for failing to disclose material financial information that would have stopped the merger from going through.
Advice to a non‐client
Generous “suggestions” to someone who is not a client can cost the accountant. A businessman who was unhappy with his tax accountant and was searching for a replacement met with an accountant candidate. During the first interview, he mentioned he wanted to alleviate the tax burden associated with a gain on the sale of property. In fact, he asked the CPA he was interviewing for advice regarding a particular “tax shelter.” This CPA outlined the high risks associated with such a shelter. The potential client thanked the CPA and left his office. The CPA did not hear from this individual again. Later, the IRS blew in the doors of this shelter, going after this individual for back taxes, penalties and interest. The individual filed suit against many parties, including the CPA he had met with only once. Although the CPA eventually was exonerated, the litigation resulted in a hefty loss of billable time and defense costs.

Questions to Ask

Have you used the specific Accountants E&O application rather than a Miscellaneous E&O app?
When an industry warrants its own separate errors & omissions (E&O) application, there is usually a good reason for this. For accountants, bypassing the accountant’s liability application could mean less coverage for the activities in which CPAs and fiduciaries engage. Even more important, it costs your clients more. An accounting firm that has important risk management practice in place, such as requiring two signoffs for certain activities or using automatic conflict of interest systems, may be eligible for credits that will bring down the rates they pay. It is worth the extra time to complete an APL provide a good picture of the risk.
Is your business part of a franchise or is your business a member of a professional organization?
Some franchise organizations and some professional organizations provide E&O coverage to their members, and a retail agent can review the policy to make sure it is adequate. There is no reason to be overinsured, but you need to make certain all professional activities are properly covered, so a supplemental policy may be needed.
What is your ownership structure?
Are you an independent company or a subsidiary? Do have any joint ventures with other companies – as is the case with some retailers that offer tax services within their stores? Do your professionals work for the company or are they independent contractors? It is important to make certain every professional in your client’s company is covered, so structure is important.
Does your business provide extra services part of the year?
Many accounting firms provide tax services on behalf of other companies during tax season as an additional stream of revenue. Businesses that choose to expand their tax services need to make sure they have a professional policy that will protect them for all the services they perform throughout the year.
Do any of your people provide services independently – apart from their regular jobs?
Accountants sometimes have their own personal clients, for whom they provide tax or other services, apart from their “day job.” Moonlighting can be a good way to supplement income, but if a problem develops and there’s no coverage, moonlighting could be detrimental to the practitioner’s financial health. Anyone engaged in outside work should be made aware that this work is not included in the business E&O policy and should seek to obtain coverage for their moonlighting activities.

At Burns & Wilcox our expertise becomes your expertise. Our marketing materials are designed to help you give your clients what they want to hear – yes to almost any hard-to-place-risk.

Accountants Errors and Omissions (E&O): Applications

Please choose the application that best fits your needs.

If you need additional assistance please contact your local office.

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