What Is Errors and Omissions Insurance?

Mistakes and omissions clause means that with the consent of both parties, the insured or the insured will be delayed, wrong, or omitted due to negligence to inform or notify the insurer of the change in the occupied area or value of the insured subject, a significant increase in the danger of the insured subject, or other Important matters, the rights and interests of the insured under this insurance contract will not be affected. However, as soon as the insured or insured finds any delay, error or omission, they shall immediately notify the insurer of the above matters and pay the possible additional insurance premiums from the date when the risk increases significantly to the date when the insurance period expires, otherwise the insurer No liability for insurance.

Errors and omissions

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Errors and omissions

In most reinsurance contracts, there are errors and omissions. The errors and omissions clause is designed to protect the interests of the original insurer from extremely adverse consequences due to its fault or omission. Reinsurance procedures are very complicated. From the distribution and arrangement of risks to the preparation of bills and the payment of reinsurance fees, there may be occasional errors, omissions and delays, which may affect the effectiveness of reinsurance contracts. In order to avoid the disputes between the two parties, which affects the development of normal reinsurance business. Therefore, in the reinsurance contract, the original insurer and the reinsurer usually provide for errors and omissions.

Mistakes and omissions originate from

Mistakes and omissions do not invalidate other contract clauses, especially those agreed by the parties, for example, the original insurer timely and accurately informed the reinsurer of the relevant claims for compensation. In order to ensure the realization of the basic purpose of the reinsurance parties, the errors and omissions clauses must ensure that written errors (Clerical Errors) will not affect the scope of the reinsurance liability, and will not at the same time relieve the reinsurer from the greater scope of liability. On the one hand, the purpose of the mistakes and omissions clause is to prevent the failure to report reinsurance due to negligence and incorrectly report the reinsurance, leading to the termination of the reinsurance contract, as soon as errors and omissions are discovered, they are corrected immediately. On the other hand, the error and omission clause is to prevent the reinsurer from refusing to assume the scope of legitimate reinsurance, and requires the reinsurer to share the fate of the original insurer, even if the original insurer misses necessary information or provides incorrect information.

The variety of errors and omissions in the function of the clause also shows its flaws, but to avoid these flaws, the scope of the clause must be carefully drafted and clearly understood. For example, in a fractional reinsurance contract, if the error causes damage, then the error and omission clauses as a whole are invalid. In other reinsurance contracts, the errors and omissions clauses may contain corrections that require the original insurer to correct the errors as soon as they are found in an attempt to ensure fair treatment to the original insurer.

Like other reinsurance contract clauses, the drafting of errors and omissions clauses should be carefully and carefully considered. The purpose of this clause is to maintain the reinsurance relationship between the original insurer and the reinsurer to ensure the realization of the reinsurance purpose, thereby avoiding the original Serious legal consequences of insurer misstatement.