What Is Errors and Omissions (E&O) Insurance Coverage?

Keep your business protected by understanding errors & omissions insurance coverage.
Mature Businesswoman In Her Office. What is Errors and Omissions Insurance?

Errors and omissions insurance, often referred to as "E&O insurance," is a type of coverage that offers financial compensation if a professional gets sued by a client or other third party for claims of inaccurate advice, treatment, etc., that causes harm. Medical workers, lawyers, and consultants are some of the most common professionals who rely on E&O coverage to operate their businesses. If you work in one of these industries or another that offers professional advice or services to the public, you may need to add E&O coverage to your business insurance or small business insurance policy. 

An independent insurance agent can help you get set up with all the errors and omissions insurance you need. They'll get you matched to the right policy for your industry and services. But for starters, here's a breakdown of errors & omissions coverage and why it's necessary.

What Is Errors and Omissions Insurance?

So what is E&O insurance, exactly? Errors & omissions insurance is also referred to as E&O coverage or professional liability insurance. It provides financial reimbursement for a professional who gets sued by a third party, like a client, for claims of giving improper advice or failing to complete a service properly. The third-party claim must state that the advice or service caused them harm in some way. A doctor who recommends a medication that ends up harming their patient could get sued for improper professional advice. Malpractice insurance could help pay for the costs of a resulting lawsuit. 

What Does Errors and Omissions Insurance Cover?

What does E&O insurance cover? It covers the financial ramifications if a professional gets sued by a third party for claims of improper advice given or services rendered. These services or advice must have caused the client, customer, or other third-party harm in some way. E&O can cover the following:

  • Damages and expenses: If a professional or business infringes on someone else's copyright, they might have to pay damages and expenses.
  • Lawsuit and court fees: This can include attorney fees if a professional or business gets sued, whether or not they're found to be at fault. 
  • Settlement fees: If the court finds the professional or business at fault and is ordered to pay a settlement or judgment, E&O coverage can help pay these costs. 

An independent insurance agent can further explain what's covered by E&O insurance and why you might need it.

What Isn’t Covered by E&O Insurance?

Not all situations or professional errors are covered by E&O insurance. Intentionally malicious acts against the public are not covered by E&O insurance. But there are still other incidents not covered that are necessary to understand before you try to file a claim. E&O insurance doesn't cover:

  • Harassment or discrimination accusations (you'd need EPLI insurance for this)
  • Issues with temporary workers or employees
  • Contracts or other work performed before the policy's start date
  • Employee injury or illness
  • Malicious or intentional acts
  • Illegal acts

Be sure to carefully review your policy's exclusions with your independent insurance agent so you know exactly what's covered and what's not.

Who Needs E&O Insurance?

Any business or professional that offers services for the public or gives advice to the public should consider getting E&O insurance. Any time advice or services are rendered or a contract is signed, a business or professional is at risk of getting sued if what they've provided is inaccurate or incomplete. Poor advice from a therapist could cause further emotional distress for a client. This could result in a costly lawsuit.

These business professionals should consider getting E&O or malpractice insurance:

If you're unsure of whether you'd benefit from having E&O insurance for your business, an independent insurance agent can help advise you.

How Much Does Errors and Omissions Insurance Cost?

How much is errors & omissions insurance? Well, E&O insurance costs depend on several factors, including your location and the industry you work in. If you're in a high-risk industry such as one in the medical field, you inherently have a higher risk of getting sued by patients, meaning your insurance must be more expensive to compensate for the insurer's risk. These factors all impact the cost of E&O insurance:

  • How much coverage is needed: The amount of coverage you need impacts your premiums. The more coverage you need and the higher limits you need, the more your policy is likely to cost. 
  • Your location: Your business's location can impact your E&O insurance costs just like it can for any other type of coverage.
  • Your business's claims history: If there's a history of liability claims filed against your business already, the insurance company will charge you more for coverage to compensate for your perceived higher risk of another claim.
  • The number of employees you have: The more employees you need to cover with E&O insurance, the more coverage you'll need and the more you'll have to pay for it.

An independent insurance agent can help provide you with exact quotes for E&O coverage in your area.

How Do I Get E&O Coverage?

An independent insurance agent is your greatest ally in getting you set up with all the E&O insurance you may need. These agents shop and compare quotes for you from several different professional liability insurance companies. Ultimately, they'll provide you with only the results that offer the best blend of coverage and cost. And down the road, they'll be there to help file claims and answer questions for you.

Errors and Omissions Insurance Frequently Asked Questions

Say an accountant files a client's tax return incorrectly, potentially resulting in penalties and fees. As a result, the client then files a lawsuit against their accountant for the professional error. The accountant could use their E&O insurance to help cover the costs associated with the lawsuit and any settlements they're ordered to pay the client.

Businesses and professional individuals who have E&O insurance can complete operations with a greater sense of security thanks to their coverage. Those who work in industries with a high risk of liability claims being filed against them may have to pay tens of thousands of dollars or even more if they get hit with a lawsuit. If there's any risk of you or your business making a professional error that impacts the public, having E&O insurance can certainly be worth it.

Breach of contract is one of the most common E&O insurance claims, and can be filed against a business or professional if they were unable to meet their obligations for some reason. Another common E&O claim is fraud, and this type of claim can be filed against a professional if they misled a client about their skill set for the purpose of financial gain. Negligence is another common claim that can be filed against a professional for sloppy or incomplete work, such as a web developer who programmed a client's site and left it vulnerable to hackers. Finally, misrepresentation, or making a false statement to convince a client to sign a contract with you, is another common E&O claim.

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