Yardley CPA Posted May 19, 2015 Report Share Posted May 19, 2015 Wondering if anyone practices without having an E&O Policy? Quote Link to comment Share on other sites More sharing options...
Elrod Posted May 19, 2015 Report Share Posted May 19, 2015 Never had E&O for the 37 years that I practiced, Just coverage on my equipment and liability in the event a client fell on a sharp pencil or something.I just paid for any of my errors or omissions to the client.."cheep" Quote Link to comment Share on other sites More sharing options...
JJStephens Posted May 19, 2015 Report Share Posted May 19, 2015 I've been considering it for several years. In fact, twice in recent years I started similar threads on this board. Still haven't done anything other than get a few quotes and then hope nothing happens when I can't afford the substantial premiums. Quote Link to comment Share on other sites More sharing options...
SaraEA Posted May 20, 2015 Report Share Posted May 20, 2015 At a professional association meeting a couple of years ago the IRS liaison told of a preparer in our IRS area whose office had been broken into. The thief took tax returns or data, I don't remember which. Long story short, the preparer did not have insurance and just the cost of paying for credit monitoring for all those clients put her out of business. I would say no one can afford NOT to have E&O. 1 Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted May 20, 2015 Report Share Posted May 20, 2015 I am confused... How does E&O cover theft? Are we talking two different insurance coverage plans? Quote Link to comment Share on other sites More sharing options...
JRS Posted May 20, 2015 Report Share Posted May 20, 2015 >>I am confused... How does E&O cover theft?<<This is my interpretation of E&O. I guess you could say the mentioned Tax Preparer was negligent in letting someone break in. BUT, my E&O would not cover it.I took the definition from Wikipedia because I am also confused. "Professional liability insurance (PLI), also called professional indemnity insurance (PII) but more commonly known as errors & omissions(E&O) in the US, is a form of liability insurance that helps protect professional advice- and service-providing individuals and companies from bearing the full cost of defending against a negligence claim made by a client, and damages awarded in such a civil lawsuit. The coverage focuses on alleged failure to perform on the part of, financial loss caused by, and error or omission in the service or product sold by the policyholder. These are potential causes for legal action that would not be covered by a more general liability insurance policy which addresses more direct forms of harm." Quote Link to comment Share on other sites More sharing options...
RitaB Posted May 20, 2015 Report Share Posted May 20, 2015 I do not have E & O insurance. Quote Link to comment Share on other sites More sharing options...
Yardley CPA Posted May 20, 2015 Author Report Share Posted May 20, 2015 I do not have E & O either. I did not realize that E & O would cover what Sara mentions above. To Jack's point, I was under the impression that scenario would fall more under a general liability policy versus E & O. I always thought E & O covered "error and omissions" on a tax return and provided some sense of security in the event a client brought a claim against you. I didn't think it covered any type of theft or loss of content. Quote Link to comment Share on other sites More sharing options...
jklcpa Posted May 20, 2015 Report Share Posted May 20, 2015 I do not have E & O either. I did not realize that E & O would cover what Sara mentions above. To Jack's point, I was under the impression that scenario would fall more under a general liability policy versus E & O. I always thought E & O covered "error and omissions" on a tax return and provided some sense of security in the event a client brought a claim against you. I didn't think it covered any type of theft or loss of content. E & O would not cover what Sara mentioned. Read JRS' post a couple of posts up. In fact, theft of records or data might, or might not, now be covered under a practitioner's general liability policy either. Some of the advertisements I've seen lately are selling a separate policy or rider to cover identity theft and data breach issues meaning that purchasing that insurer's basic policy won't cover identity theft and data breaches. 1 Quote Link to comment Share on other sites More sharing options...
mcb39 Posted May 20, 2015 Report Share Posted May 20, 2015 I do not have E and O insurance, but I do have business liability on my Homeowners policy. I explored the issue and the insurance co didn't seem to know where to put my small practice. As someone else cited, if I make a mistake, I pay for it; and I can only think of one instance over the years where that has happened and since it was partially the client's fault, I fired the client. 2 Quote Link to comment Share on other sites More sharing options...
RitaB Posted May 20, 2015 Report Share Posted May 20, 2015 As someone else cited, if I make a mistake, I pay for it; and I can only think of one instance over the years where that has happened and since it was partially the client's fault, I fired the client.This would seem to be good insurance, too. Firing "that" guy. You all know what I mean... 3 Quote Link to comment Share on other sites More sharing options...
Ringers Posted May 20, 2015 Report Share Posted May 20, 2015 I have been practicing since 1973 and have never had E&O insurance due to cost. I do have an additional umbrella policy on the house to cover liability in case of falling on the ice, etc. Any errors over the years I have paid the penalty and interest portion and told the tax payers they had an interest free loan from the IRS for the time it took the IRS to find the error. 2 Quote Link to comment Share on other sites More sharing options...
michaelmars Posted May 20, 2015 Report Share Posted May 20, 2015 back when I only had insurance for tax work it was less than $500 per year. Now that I have coverage for everything but audits my $2mil of coverage is $120 per month. The scariest part of practicing is E-filing, you put in a wrong a/c number etc and you client has huge penalties. Recently a client called that is $750,000 of tax payments didn't come out of his account and he was already demanding that we pay all interest and penalties. Well luckily he was checking from the wrong account. Imagine the late filing penalties if his extension somehow got messed up. Well worth paying for insurance. The most important part of the insurance isn't them paying your penalties but paying for you lawyer when a client claims malpractice. 4 Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted May 20, 2015 Report Share Posted May 20, 2015 My, possible most, E&O insurance is based on risk and income. As my business is pretty small, my insurance is $457 this year. I keep it primarily because I do several trusts and the beneficiaries just might not like the way the numbers turn out.Like others here, I do pay for any errors of mine that cause interest and/or penalties. It's in my engagement letter. If the client omits or provides incorrect information, not my fault. If I do the same (transpose numbers, wrong street address, etc.) and a penalty arises from my error, I pay. But I also point out to the client that it was their responsibility to carefully read everything on the return before approving.So far, my errors in over 20 years have amounted to less than $100 and kept the client happy that I was on their side. In 4 more years, the trusts are closed but I will definitely keep my insurance for a year or so after that. Not that I don't 'trust' the beneficiaries...My homeowner's insurance (additional business and umbrella) covers my equipment and any client issues that may arise from tripping, etc. But I have very few actual client visits. This year a 90 year old who insists on coming struggled up the steps. I told her that next year I will come to her. She knocked over my mailbox backing out 2 years ago and nearly hit the telephone pole so I don't let her back out of the drive any more! 3 Quote Link to comment Share on other sites More sharing options...
Lee B Posted May 20, 2015 Report Share Posted May 20, 2015 I have spent between $500 and $600 per year for Professional Liability Insurance for the last 22 years.About 20 years ago I added Earthquake Insurance to my Homwowners Policy for the same reason.It's risk management, you insure against potential losses that you can't afford.How many of you would stop carrying Homeowners/Fire insurance on your homeor stop carrying Liability Insurance on your vehicles ??? 3 Quote Link to comment Share on other sites More sharing options...
Abby Normal Posted May 20, 2015 Report Share Posted May 20, 2015 I'm a better safe than sorry guy. I have always had E&O. 5 Quote Link to comment Share on other sites More sharing options...
B. Jani Posted May 20, 2015 Report Share Posted May 20, 2015 Does not matter weather practice is big or small, if lawyers involved, the bill is very high so carrying an EO always wins. We all have different insurance for protection. I always believe that hopefully never have to use it but...... Quote Link to comment Share on other sites More sharing options...
easytax Posted May 20, 2015 Report Share Posted May 20, 2015 I have been practicing since 1973 and have never had E&O insurance due to cost. I do have an additional umbrella policy on the house to cover liability in case of falling on the ice, etc. Any errors over the years I have paid the penalty and interest portion and told the tax payers they had an interest free loan from the IRS for the time it took the IRS to find the error.NOTE: From my agent and pass knowledge - Umbrella will not cover anything that is not already covered--- i.e. if you have business ins. then umbrella may extend coverage --BUT -- if you do NOT have business ins. and the loss is do to business pursuits, etc. them umbrella will NOT extend or cover. If coming to do business (taxes) and falls on ice -- there could be no coverage from any part of the "normal" policy as it occurred because of business and therefore umbrella would NOT cover.back when I only had insurance for tax work it was less than $500 per year. Now that I have coverage for everything but audits my $2mil of coverage is $120 per month. The scariest part of practicing is E-filing, you put in a wrong a/c number etc and you client has huge penalties. Recently a client called that is $750,000 of tax payments didn't come out of his account and he was already demanding that we pay all interest and penalties. Well luckily he was checking from the wrong account. Imagine the late filing penalties if his extension somehow got messed up. Well worth paying for insurance. The most important part of the insurance isn't them paying your penalties but paying for you lawyer when a client claims malpractice.NOTE: From several "clients" knowledge who have had both personal and smaller claims ---- usually somewhere in the policy -- you --- give the insurance company to decide/close the case for you ---- therefore they may decide to "settle" and you are done --- yes, current issue closed but still Fault has been admitted and it is on your insurance record --- regardless. CAREFUL what you ask for ----- the attorney paid feature is nice -- however it can also "bite" you (especially if your policy has a "cap" on what may be paid not just to settle issue but on what is/can be spent for attorney and court fees. Just food for thought --- I tend to agree with (and have been "insurance poor") having as much coverage as possible for whatever claims might arise but each to their own as I know many who do not have E&O tax coverage but as insurance/financial agents have E&O for that part. Quote Link to comment Share on other sites More sharing options...
SaraEA Posted May 21, 2015 Report Share Posted May 21, 2015 Sorry to confuse. You have to purchase a rider to your E&O that overs loss/theft of client data. You can buy another rider that covers employee theft of same. Tax refund theft is such a ballooning problem right now it's not a bad idea. Thieves know that tax prep firms have the data they want. If you don't get the insurance, at least invest in an alarm system. I know, during tax season most of us feel like we never leave our offices.......but eventually it will be July. 4 Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted May 21, 2015 Report Share Posted May 21, 2015 Never had it, but these days if I was still in business I might. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted May 21, 2015 Report Share Posted May 21, 2015 (edited) Tonight's topic at the NY/CT-ATP dinner meeting was Cyber Breach taught by the first CPA in CT to have his system breached. The thief was extradited from Bulgaria and is in a federal prison in NJ, but his colleagues are still in Bulgaria and our tri-state area and continue their trade. Expensive. Scary. One of his tips was to add a cyber breach rider to our insurance. (He had very luckily just changed E&O carriers, and his new policy had $100,000 for cyber breach.) He suggested at least $250,000 plus $1,000,000 "third party" for that client who decides to sue you when they lose that mortgage when the IRS sends their bank the fraudulent return instead of their actual return. The IRS had him give a webinar. Edited May 21, 2015 by Lion EA 3 Quote Link to comment Share on other sites More sharing options...
NECPA in NEBRASKA Posted May 21, 2015 Report Share Posted May 21, 2015 I have had liability insurance since I began business. It has not paid any claims, but they have been very helpful whenever I have questions and have provided an attorney for consultation the few times that I have had records subpoenaed for a couple of client's that had lawsuits filed against them. It was great to have the attorney deal with the other attorneys and to know what I should and should not provide. It's well worth the money to have it. I also have business insurance for liability, my business property and an umbrella policy, since my office is at home now. I may be a little overinsured, but I have way too many elderly clients that insist on coming here and it petrifies me. Quote Link to comment Share on other sites More sharing options...
Yardley CPA Posted May 21, 2015 Author Report Share Posted May 21, 2015 Lots of food for thought and all of this information underscores the importance of being informed and making the right decision for your practice. Thanks to everyone who chimed in! Have a good weekend. 1 Quote Link to comment Share on other sites More sharing options...
JJStephens Posted May 21, 2015 Report Share Posted May 21, 2015 When last I checked there were not a lot of options for E&O coverage. And without much competition, rates trend higher. Anyone have a tip on affordable coverage. Okay, 'affordable coverage' may be an oxymoron. How about 'less outrageous' coverage? Quote Link to comment Share on other sites More sharing options...
joanmcq Posted May 21, 2015 Report Share Posted May 21, 2015 I've had E&O since about 2005, costing this year $750. I do have a lot of coverage for the size of my practice, but I also keep high auto limits plus an umbrella policy. No earthquake or flood, although I consider both each year. I do not want to be used and do like being able to call with any question. It's been nice for the comfort letter problem (just got a request for one of them yesterday in fact). 2 Quote Link to comment Share on other sites More sharing options...
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