Should my E&O insurance cover my personal name, or my LLC's name?
August 20, 2019 12:15 PM Subscribe
I do contract computer programming and (since 2018) I do this as a single member LLC. I am careful to do business only as the LLC, I keep company and personal finances separate, etc. How should I carry my errors and omissions insurance for maximum safety?
When I renewed my E&O insurance last year, after creating the LLC, I switched to the name of the LLC.
Late in the process I asked if this would also cover me personally, in the event that I was sued personally or the corporate veil was pierced. As I understand it, this is a risk to consider, even doing business as an LLC.
I was assured that as long as I was doing business in the name of the LLC I would be fine . . . but the "insured" party on the policy is only the LLC. I don't trust this assurance.
Last year I just went along with it, but maybe I should rethink this year.
Does it make sense to have E&O that covers me, personally, if I am not doing business in my own name? Is that safer for me if I do get sued? (I have more money in personal savings than I do in the LLC.)
Is there a standard way to get E&O that covers both the scenarios of my LLC getting sued and also any chance of me personally being held liable? If I have to choose just one, which makes more sense?
When I renewed my E&O insurance last year, after creating the LLC, I switched to the name of the LLC.
Late in the process I asked if this would also cover me personally, in the event that I was sued personally or the corporate veil was pierced. As I understand it, this is a risk to consider, even doing business as an LLC.
I was assured that as long as I was doing business in the name of the LLC I would be fine . . . but the "insured" party on the policy is only the LLC. I don't trust this assurance.
Last year I just went along with it, but maybe I should rethink this year.
Does it make sense to have E&O that covers me, personally, if I am not doing business in my own name? Is that safer for me if I do get sued? (I have more money in personal savings than I do in the LLC.)
Is there a standard way to get E&O that covers both the scenarios of my LLC getting sued and also any chance of me personally being held liable? If I have to choose just one, which makes more sense?
Best answer: I have E&O Insurance for a 1-person S corporation, the corporation is the named insured, the 42-page insurance policy says it covers "you", and under definitions, it says "you" includes:
(1) any past or present partner, executive officer... but only while performing their duties as such
(2) any past or present employee of the named insured but only while performing their duties as such...
Check for similar wording in your policy.
posted by mistersix at 1:54 PM on August 20, 2019 [1 favorite]
(1) any past or present partner, executive officer... but only while performing their duties as such
(2) any past or present employee of the named insured but only while performing their duties as such...
Check for similar wording in your policy.
posted by mistersix at 1:54 PM on August 20, 2019 [1 favorite]
Response by poster: Mistersix, you're quite right. I do have something similar in my policy. Thanks.
posted by mattu at 8:17 PM on August 20, 2019
posted by mattu at 8:17 PM on August 20, 2019
This thread is closed to new comments.
The LLC is, in most states if not all, irrelevant to liability protection. It simply provides no protection against personal liability for personal errors. If you make a mistake, you can be sued individually, despite the LLC form. And the LLC can be sued. The assets of both are at risk, and that is why both need insurance.
The limitation on liability for both corporations and LLCs is the elimination of the risk of liability for the actions of others - your employees, your co-owners, etc. But you have none of those. You always continue to have exposure to personal liability for your own errors. It is adequate insurance that protects against that exposure.
posted by megatherium at 1:42 PM on August 20, 2019