What if there is a USB transfer error while using the MAX3420E? Do I need to write code to handle the error condition?

No. The MAX3420E manages this for you. If the MAX3420E receives an error condition back from the host, it automatically resends the same data when the host retries the IN transfer. The MAX3420E also automatically handles other error-checking such as data toggles. Some possible USB errors (such as a user unplugging the cable in the middle of a data transfer) need to be handled by firmware.