The Ins and Outs of Errors and Omissions Insurance

Errors and omissions (E&O) insurance is a type of professional liability insurance. With an E&O policy, your business is protected against claims of mistakes and negligence. Do you need E&O insurance?

What is E&O insurance?

E&O insurance protects your company if someone alleges that you made a critical mistake. It may cover errors or oversights in your work, failure to deliver a service or meet a deadline, failure to meet a certain standard of care, or breach of contract.

What does E&O insurance cover?

If someone files a lawsuit against your business, E&O insurance will cover attorney fees (whether or not you are deemed at fault), settlements or judgments owed if you are found at fault, and expenses. Some E&O policies only cover work done in the United States; some cover work done internationally.

What doesn’t E&O insurance cover?

E&O insurance may not cover purposeful wrongdoing and illegal acts. It also doesn’t cover things that are covered by other types of insurance, such as bodily injury (which general liability insurance typically covers), data leaks (which cyber liability insurance typically covers), employee injuries (which workers’ compensation insurance typically covers), and employee discrimination and harassment (which employment practices liability insurance typically covers).

What else do I need to know about E&O coverage?

E&O policies are generally “claims-made policies.” That means coverage must be in place at the time a claim is made in order for the insurer to cover it. So, if your coverage lapses, you will no longer be protected. However, you can ask that E&O policies be retroactive to a specific date defined in the policy, meaning they will cover claims dating back to that point but not before.

Who needs E&O insurance?

Some professionals are required to carry E&O insurance by law or licensing boards. Clients may also decline to work with you if you don’t provide a certificate of E&O insurance. Regardless, if you provide professional services for a fee, you should have E&O insurance. For example, you might need this kind of insurance if you work in architecture, accounting, financial services, insurance, IT, marketing communications, consulting or real estate.

How can you get E&O insurance?

E&O insurance is a common type of coverage. All major commercial insurers offer it. Some insurers will allow you to add E&O insurance to a business owner’s policy, which includes general liability and commercial property insurance. This can help you save money. However, if you operate a home-based business, don’t expect to get E&O insurance under your homeowners’ coverage; you will need a separate policy.

How much does E&O insurance cost?

The cost of E&O insurance varies depending on several things, including whether you’re in a high-risk industry, whether you have a history of liability claims being made against your business, where you do business, how many employees you have and how much coverage you need.

Obtaining E&O insurance can be confusing, so call or email us today and we can help you better understand E&O insurance terms and coverage.