As a certified public accountant, you and your firm may be involved in a variety of services for your clients, including auditing financial statements, consulting on internal controls, preparing taxes, investigating suspicious financial activity, and more. The role your firm plays is critical to the financial health and well-being of your clients’ businesses, and as such, the work you take on carries significant responsibility.

Like most businesses in the financial services sector, with great responsibility comes great risk. CPA firms are entrusted with highly sensitive company financials and are often tasked with ensuring adherence to generally accepted accounting principals (GAAP) and verifying that there are no material misstatements in financial records. Clients rely on a CPA firm’s services to ensure their businesses are financially compliant, and it’s easy to see how one mistake could lead to a whole mess of trouble for your clients.

Putting the appropriate safeguards in place can help to protect your business from any risks you may be susceptible to through your professional services. It could be an unhappy client who alleges your firm’s errors caused financial losses, or it might be an employee of yours who accidentally leaks sensitive customer data. There are a variety of scenarios in which your firm may be held liable and on the hook for untold financial damages. Moreover, there are the everyday business risks that you must consider addressing as well. From natural disasters to employee injuries, just simply running a business exposes you to a number of liabilities. With the right comprehensive insurance policies in place, though, you can give your business the protection it needs when things go wrong.

Consider purchasing business insurance for your CPA firm if:

• You want to insure your business against claims of poor performance or negligence
• You store client or employee data like financial records or personally identifiable information (PII)
• You employ others
• You provide benefits to your employees, like health insurance or retirement plans
• You lease or own your own office building and store valuable equipment or property
• Customers or clients visit your office

What insurance coverage do I need as a certified public accountant?

Here are some of the most common business insurance coverages for CPAs, along with examples of incidents that would trigger these coverages.

Professional Liability Insurance

Professional Liability Insurance, also known as Errors & Omissions Insurance, can offer financial protection for your accounting firm when clients sue your business claiming errors or poor performance in your work and services. In the case of a dissatisfied client who claims financial loss due to your professional work, your business may be sued for damages. Professional liability insurance is meant to cover your legal fees and any settlements or judgements in these types of suits.

Examples:

• Errors: Your firm is hired to review a client’s quarterly financial statement. You find no material misstatements and give the financial reporting a pass. It is later found that you missed a significant error in the quarterly statement.
• Negligence: You are hired to prepare a client’s tax returns. You unknowingly file the returns with incorrect information. 
• Lawsuits without merit: Your firm is consulting with a client to review their internal controls and identify possible operational improvements. You give the client a number of recommendations for improvement, but they end up ignoring your work. This leads your client to experience financial losses due to poor internal controls, which they end up blaming your firm for causing. They sue your company for damages.

Commercial General Liability Insurance

Commercial General Liability Insurance protects your business financially from lawsuits and damages that arise from non-professional negligent acts. A CGL policy will cover claims of bodily injury, property damage, and personal and advertising injury that are unintentionally caused by your business.

Examples:

• Property Damage: When visiting a client at their offices, one of your employees accidentally knocks over an expensive art sculpture. Your CGL policy would cover the damages.
• Bodily Injury: A vendor is delivering office supplies to your office. As he is carrying a box of copy paper into your supply closet, he trips over a loose piece of carpet. He ends up injuring his back, requiring medical treatment and putting him out of work for a month. He sues your business to cover his medical fees and lost wages.
• Personal and Advertising Injury: You accidentally post a piece of libelous information about a competing accounting firm on social media. The competitor sues your firm for reputational damage.

Commercial Property Insurance

Commercial Property Insurance provides protection for the value of the physical assets and property your business owns. If an unforeseen accident or natural disaster hits your business, having property insurance can help your business recover. Commercial property insurance typically covers property such as buildings, equipment, inventory, furniture, tools, artwork, and computers. Common covered causes of loss include fire, wind, hail, and vandalism.

Examples:

• Buildings: A hailstorm shatters the skylights and windows in your building.
• Contents: A storm tears a hole in the roof of your building, letting in rain and wind into your office. Your office electronics suffer water damage because of the storm.
• Property of Others: The art sculpture that you have on lease in your lobby is damaged in a fire.

Additional Coverages

• A Business Owner’s Policy (BOP) is a package of several common types of insurance for small businesses. BOPs generally bundle together general liability, property insurance, and business income insurance into a single policy. The pricing on a BOP can often be lower than purchasing the insurance policies separately.
• Workers’ Compensation Insurance is a form of liability insurance that covers wages and medical expenses for employees who suffer work-related injuries or illnesses. In exchange for accepting workers’ compensation benefits, an injured employee agrees not to sue your business for the injury.
  • Example: An employee slips and falls on some spilled water in the break room. He injures his hip and requires medical treatment.
• Cyber Liability Insurance covers your business against liability and property losses caused by cyberattacks such as hacks, data breaches, denial of service attacks, and viruses.
  • Example: An employee opens a suspicious email and accidentally downloads an executable file that ends up being a virus. The virus spreads across your company network and renders all infected computers unusable. 
• Employment Practices Liability Insurance protects against lawsuits filed by employees against your company. Specifically, EPL insurance protects against suits involving claims of wrongful treatment, such as discrimination or harassment, and covers any judgments or legal fees associated with these claims.
  • Example: Employees belonging to a racial minority feel they are being denied promotions at your accounting firm due to their race. The employees file a class action lawsuit against your company.

Conclusion

Finding the right insurance coverage for your accounting firm is a critical step in safeguarding the company you’ve built and the employees that work for you. As a certified public accountant, your business is constantly involved with outside clients, offering financial recommendations and guidance that may expose you to a number of professional liabilities. Moreover, your business faces common risks that all businesses deal with, from employee injuries to unintentional property damage to cyberattacks. Making sure your business is appropriately insured can help to give you and your employees peace of mind and provide the financial cushion you need to weather any storm.