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The Value of E&O Insurance for Recruiters

QUESTION: I want to purchase E&O insurance.  What are your thoughts about recruiters having this insurance?  Do you have any recommendations on who to purchase it from?  – Craig, Dallas, TX

Photo by Ulises Baga on Unsplash

ANSWER: Great question, the need for Errors and Omissions (E&O) Insurance is common amongst new and tenured recruiting firm owners. I see so many people cheap out and not invest in it. In the litigious society that we are in now, one can be sued for any reason. You place a candidate and they embezzle, harass somebody, whatever and the client sues you for negligence. You have no control over managing the candidate. Bringing a suit against you does not mean they are going to win. In all reality, the biggest cost of any lawsuit is the defense. Even if you settle, or get it kicked out, you have to hire an attorney. That defense alone is going to cost five figures. Therefore, I absolutely believe it is 100% necessary. 

Most of the major insurance brands offer E&O policies. There are many variables that determine the investment for a policy, but last I checked a comprehensive policy can be anywhere between $2,000 to $4,000 per year for an office, depending on what you want to accomplish. The yearly investment is potentially less for a solo recruiter. 

There are two critical components of E&O insurance:   

  1. One just a pure E&O on placements and if you are a solo operator, that is all you need.  
  2. If you are a recruiting firm owner, make sure your policy includes defense against employee issues such as harassment.  

Additionally, you want to check that the policy not only includes coverage for the event but also has language that when the event occurs, you turn it over to the insurance company and they hire the attorney to defend it so there is no out of pocket to you? From my experience, most of these instances are settled out of court. I invested in E&O for the 20 years of our firm, and thank God I never had to use it, but it is sleep at night stuff.  

This is something that, you do not want to get whacked between a settlement or legal fees of $50,000 to $60,000. It is a great investment that is ultimately a write-off. 

Again, E&O insurance is a relatively small investment. If we were doctors and lawyers, we would be paying $100,000, $200,000, or $300,000 a year for the same type of protection. As recruiters, because claims against the policy do not happen that often, it is usually just a few thousand bucks that are well worth the investment.


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