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

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

When most business owners think about insurance, they think about accidents - someone gets hurt, property is damaged, or something unexpected happens on a job site. The coverage for that situation is called Commercial General Liability (CGL).

But what happens if the loss isn't caused by an accident?

What if it's caused by a mistake?

That's where Errors & Omissions (E&O) insurance comes in. While not every business needs E&O coverage, it can be an important part of protecting businesses that provide advice, recommendations, designs, or professional services.

What Is Errors & Omissions Insurance?

Errors & Omissions insurance - often called E&O insurance or Professional Liability insurance - helps protect a business when a client claims that a professional mistake, omission, or negligent service caused them financial harm.

Unlike General Liability insurance, E&O does not focus on bodily injury or property damage.

Instead, it responds to allegations that a business's professional work caused a financial loss.

What Does E&O Insurance Cover?

While coverage varies by policy, E&O insurance is generally designed to respond to claims involving:

• Professional mistakes
• Negligence
• Errors in work performed
• Missed deadlines
• Incorrect advice or recommendations
• Failure to deliver professional services as promised

It can also help cover legal defense costs for covered claims.

More Info: What is E&O Insurance for?

Who Needs E&O Insurance?

E&O insurance is commonly purchased by businesses that provide professional advice or specialized services.

Examples include:

• Consultants
• Notaries
• Architects
• Engineers
• Medical Service Providers
• Insurance agents
• Real estate professionals
• Technology companies
• Accountants
• Designers (interior or marketing as an example)

Some contractors may also benefit from E&O coverage, particularly if they provide design, consulting, project management, or professional recommendations in addition to performing physical work.

Five Examples of E&O Claims

1. Incorrect Recommendation

A consultant recommends the wrong software solution for a client, resulting in significant financial losses. The client alleges negligence and files a lawsuit.

2. Design Error

An engineering firm's design contains an error that requires expensive revisions during construction. The client seeks reimbursement for the additional costs.

3. Missed Deadline

A project manager misses a contractual deadline because required documentation was overlooked. The client claims the delay caused lost revenue.

4. Incorrect Professional Advice

An insurance professional recommends coverage that ultimately does not meet the client's contractual requirements. The client alleges the recommendation caused financial harm.

5. Omitted Information

A consultant forgets to include an important specification in project documents. The oversight results in additional expenses for the client, who seeks compensation.

How Is E&O Different from General Liability?

One of the easiest ways to explain the difference is:

General Liability protects businesses from accidents that cause bodily injury or property damage.

Learn more about how Commercial General Liability insurance works.

Errors & Omissions protects businesses from claims that their professional work or advice caused someone financial harm.

Think of it this way:

• A ladder falls and damages a customer's vehicle? That's generally a General Liability claim.
• A consultant provides incorrect advice that costs the customer money? That's generally an Errors & Omissions claim.

The two policies protect against different types of risk, and many businesses benefit from carrying both.

Check out: Do I need to get both E&O & General Liability Insurance?

A Practical Takeaway

Every business faces risk, but not every risk is the same.

General Liability helps protect businesses from accidents involving people or property.

Errors & Omissions helps protect businesses when professional work, advice, or services are alleged to have caused financial harm.

Understanding the difference helps business owners make informed decisions about the coverage that's right for their operations and ensures they aren't relying on one policy to protect against risks it wasn't designed to cover.

Where Can I Get Errors & Omissions Insurance?

You're already in the right place! Foxquilt gives you digital access to our Errors & Omissions product - meaning you can instantly get a tailored quote for your professional needs that you can purchase online, in minutes. You’ll even get your policy documents immediately in your inbox after you purchase.

Small business owners can get insured at http://join.foxquilt.com today.

Agents can login to Foxden or access through their local Wholesaler. Looking to have Foxquilt on your carrier lineup? Meet with our partnerships team.