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The editors of Mariners Journal have asked if I could write a short essay in answer to the above question. "Piece of cake"; at least that is what I thought until I tried to explain it. So here goes.

In a general sense, all liability policies, whatever they may be called, respond only in the event that (1) the insurer accepts that the insured would be held liable or (2) the insured has, in fact, been held liable by a court. However, insurers, in the construction and pricing of liability policies, attempt to tailor make policies for different categories of persons, this depending upon what they do and to what risks they expose themselves as a result of their activities. Let us go from the general to the particular.

A "General Liability" policy covers one for one's liability for property damage or bodily injury, as well as resultant financial loss. However, these policies exclude cover for property and persons that are in the insured's care, custody and control for the reason that the insurers wish to rate that risk differently. To put it another way, the insurer does not want, under a "General Liability" policy, to insure against damage to things that the insured may be carrying, repairing or warehousing, etc.

If you need liability insurance for risks arising out of damage to things which are in your care, custody and control, as well as resultant financial loss, then the insurers will sell you a "Legal Liability" policy specifically written for your trade. Thus a trucker will be offered a "Carriers Legal Liability" policy, a stevedore a "Stevedores Legal Liability" policy, a charterer a "Charterers Legal Liability" policy, etc., etc. Please note that in both the "General Liability" policy and "Legal Liability" policy there must be liability arising out of actual property damage or actual bodily injury for the policy to respond. In other words, a financial loss not resulting from property damage or bodily injury will not be covered by such policies.

So the question then arises as to how one would insure one's liability if that liability does not result from direct involvement with and liability for property loss or bodily injury. Truckers, stevedores, terminal operators, charterers, etc., become liable for property damage or loss because they damage it or lose it. But what if you are an intermediary, such as a shipbroker, transit load broker, ships agent or freight forwarder. Such people do not handle, carry or warehouse cargo or other property. These people give advice, make arrangements, conclude contracts on behalf of other people and issue documents. Physical property damage or loss may result from the incorrect doing of these things but it is more likely that a financial loss will result, such as a shipbroker designating the wrong load port, thereby leading to the expense of rerouting the cargo; a transit load broker contracting with a trucking company which does not have a permit to cross the Canada/US border, thereby leading to expense and delay; a freight forwarder designating to the carrier an incorrect destination address, thereby leading to expense.

Here is where "Errors and Omissions Liability Insurance" comes into play. It will cover one's liability for the financial consequences suffered by another, irrespective of whether there has been actual property damage or loss. So when you see "Errors and Omissions" you think of people who sit behind desks, talk on the phone, communicate electronically and are dressed for the office but who, nonetheless, are capable, because of what they do, of causing a financial loss.

In conclusion, an analysis of the ordinary and even legal meaning of the words will not help one distinguish between a "Legal Liability" policy and "Errors and Omissions" policy because both cover legal liability. However, the insurance industry covers desk related errors by "Errors and Omissions" insurance, with the actual conveyor, builder, handler, etc. being covered under "Legal Liability" insurance. To put it overly simply: if you can get your hands dirty in the doing of what you do, you probably need "Legal Liability". If the only way you get dirty is from the ink of your pen, it is probably "E&O" that you need.

In the final analysis "What's in a name...a rose by any other name would smell as sweet". So read the terms and conditions of the policy and if you can't understand it and it can't be adequately explained to you (and I am afraid that there will be a good chance of that, but not because of any deficiency in your education) don't buy it.

I hope the above is of some help.

Submitted by: David F.H. Marler B.A., B.C.L.

Assisted by: Stephanie A. Marler B.A., F.I.I.C., A.I.B

Website: www.marlerlaw.ca

Knowlton, Quebec, April 15, 2004

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