If you work as an independent consultant long enough, a lawsuit is almost inevitable, this is especially true for recruiters. There have been several instances where a recruiter has been sued for failing to properly vet a candidate before placing him/her with a company.  Losing a lawsuit can put a recruiter out of thousands of dollars and even out of business.  That’s why having E&O (errors-and-omissions) insurance is imperative if an independent recruiter plans to secure the assets of their business over the long-term.

What is E&O insurance?

E&O insurance is an insurance policy that protects the insured from liability caused by mistakes in your professional work such a candidate misrepresentation you failed to detect or your inadvertent failure to comply with rules and regulations.  Basically, E&O insurance will protect a recruiter from the negative consequences of honest mistakes made during the normal course of the doing business.  For example, if a recruiter failed to do a proper background check on an attorney they placed and it turned out that the attorney misrepresented their experience; the client may want to sue the recruiter for professional negligence.  Well, with E&O insurance, the recruiter’s financial exposure to a lawsuit judgment would be minimized.

While E&O insurance is not offered by most insurance brokers, shopping around for brokers who specialize in providing insurance for businesses will probably yield at least a few leads.