Errors & Omissions Liability Coverage
Errors and omissions liability insurance, often called E&O, protects your business if you make a mistake or omission when rendering your specialized services. Even if you didn’t do anything wrong, your client can sue your business if they believe you to have been negligent while performing your services. Without E&O coverage, you could be stuck paying expensive legal fees out of pocket.
FAQs
What does E&O cover?
E&O insurance is intended to protect your business against actual or alleged errors made in the course of providing specialized services. Negligence, inaccurate advice, malpractice and misrepresentation are common scenarios that can result in lawsuits. You could be sued by the client if you give incorrect advice, omit a piece of information or fail to deliver your services within a designated timeframe. Defending yourself against such allegations can be extremely costly, which is why many E&O policies provide coverage for defense costs.
What are some examples of claims scenarios?
- An interior designer is sued by a client for ordering costly materials that can’t be used
- A project manager is sued because a project is significantly delayed and over budget
- Your private investigation firm accidentally serves the wrong individual court papers
- A plumbing contractor is sued for the decision to place a bathtub in particular spot. This decision results in severe water damage.
- A public notary is sued for notarizing a document that did not have all of the required fields completed
- Your floral business is sued after you failed to deliver flowers on time for a wedding due to a clerical error
What doesn’t E&O cover?
It’s important to remember that insurance doesn’t cover everything. E&O coverage is not meant to protect against the following:
- Bodily injury or property damage exposures are covered by a general liability policy
- Data breach losses are covered by a cyber liability policy
- Fraudulent, dishonest or criminal acts are excluded from most insurance coverages
- Employment matters would be covered by a workers compensation or employment practices liability policy
What types of businesses need E&O insurance?
E&O coverage is valuable for a wide ranges of businesses throughout a variety of industries. You should consider purchasing E&O insurance if you provide a specialized service, if you regularly give advice to your clients or if you make decisions that affect the outcome of a project. It’s important to note that general liability policies do not offer protection against errors and omissions claims. Some examples of professions that should have this coverage include:
- Plumbers
- Electricians
- Interior designers
- Consultants
- Graphic designers
- Marketing firms
- Information technology professionals
- Advertising agencies
- Other contractors
How does E&O coverage work?
E&O policies are usually written on a claims-made basis, meaning that coverage is valid only for claims that occurred during the policy period. Incidents that occurred prior to coverage being in place might not be covered, although some policies include a retroactive date that grants coverage back to a specific date. Extended reporting coverage, often called “tail coverage,” can be purchased after a policy has been terminated to protect the insured from past incidents.
What does E&O insurance cost?
The cost of an E&O policy is impacted by the type of industry you’re in, the size of your business, the location of your business and the coverage limits you select.