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Recruiters as Scapegoats: Got E&O Coverage?


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Editor’s note: This article was first written a few years ago. Its advice is as timely as ever. And now, with tax season just behind us, this is a good time to review your insurance needs. Should you have errors and omissions insurance? That’s for you to decide. But Frank was glad he did. You might also want to see what Jeff Allen and others have to say.

For some 10 years, I coasted along without Errors and Omissions insurance. For 10 years, the odds favored me.

Then one day a client of mine required $4 million of E&O coverage in order to renew our contract. Since it wasn’t that expensive, and resulted in a cost of less than $2,000, I purchased the coverage.

I never needed the coverage for the original client requesting the certificate of insurance, but I was sure glad I had it when I received two nasty threats from two attorneys over the next several years.

Seems like the odds all caught up with me real fast.

Interesting thing about litigation and lawsuits I have found: Most originated from the least likely candidates or clients, those with whom I never expected to have any disputes.

I had many cases where my actions could have been interpreted as overstepping my bounds. Yet the obvious conflagrations never led to any disagreement or complaint.

Looking back at each legal threat received by an attorney (thankfully there were only two in the last six years), it was always the individual or client I had completely forgotten about, performed the least amount of work with, and had the minimal interaction with that led to a legal dispute.

Thankfully, one was settled out of court in our favor and they agreed to pay the fee.

One laughable claim was that I was not owed a fee for sending a candidate who was pregnant and showing. Since the candidate was viewed as damaged goods by the client who felt the candidate would require a long maternity leave, I should not be paid a fee until she returns. I suggested not hiring her at all.

Instead they did, and tried to keep the hire from me until a follow-up call with the candidate caught the client’s true intentions (it was all designed to avoid the fee).

Today, I received another legal letter from someone I spent all of 25 minutes with six months ago. He claims I caused him to lose his bonus when he resigned in February, even though the job offer he received was done through his own interview action and he never used our services. The only interaction? It was when he came to me for advice on negotiating a sign-on bonus to offset the forfeiture of his current bonus.

Like the good guy I thought I was, I tried to give him advice, thinking we might cross paths in the future. And now I am blamed for him never getting his 2007 bonus.

Bottom line to all these stories is companies and candidates love to use recruiters as scapegoats.

Make sure you have Errors and Omissions insurance. You may coast along for years feeling this is an extra few thousand dollars you wish you would not have to part with.

But one event is all it takes to make five years of paying for E&O suddenly worthwhile.

Frank made the plunge into the search industry in 1987. Within two years he was earning fees on a monthly basis that were comparable to his entire previous annual salary. Today he specializes in the low to mid-six figure hires and manages multiple openings each month. While he has not invented recruiter training, he views himself as someone that improves, perfects, and enhances pre-existing techniques. His newly published book, “A Manager’s Guide To Maximizing Search Firm Success©” by Searchlight Publishing has earned him more partial retainers and engaged fees — while knocking out contingency-only competitors — than any other technique ever used. It is available now on www.amazon.com
  • HeavyHitter

    O & E insurance is a complete waste; only an “HR-minded” recruiter would pay for it. My shop has been sued twice; in each case we counter-sued within 48-hours and both times THEY BLINKED. What if we lost the case? Big deal. We’d pay up and gut their company of all its talent. How can we do this?

    Because we’re HEAVY HITTERS…Omaha’s best.

    - HH