Errors & Omissions Insurance, also known as E&O is a type of a Professional Managament Liability Insurance. E&O help to protect business and professional practice from risks not typically covered by general commercial liability policy.
What is the difference between professional liability insurance and errors and omissions insurance?
Professional liability insurance and errors and omissions insurance are essentially the same thing. People use these terms interchangeably, and they are referring to the same basic product.
Why do you need errors and omissions insurance?
If you have a professional services business, having errors and omissions insurance coverage can be an integral part of protecting your business. Accusations of negligence or the failure to perform your professional services are things that any professional services business can be sued for, even if it hasn’t made a mistake. Some examples of what could be covered are listed below:
- Dissatisfied Client: A contractor is hired to review a client’s website and network security in order to implement new procedures where they find weaknesses. A month after the project is completed the client’s website gets hacked and they lose revenue from the site being down. The client accuses the contractor of faulty work. A professional liability insurance policy could protect the contractor even if they haven’t made a mistake.
- Negligence: A consultant is contracted by a client to come in and organize a project that has run past its due date and is over budget. The contractor commits to bringing the project to completion. As the contractor digs into the project, they realize that the former project manager did not present the client with an accurate view of deliverables and they are now facing a scope of work that is twice as long as original projection. When presenting the finding to the client, the contractor is accused of not doing proper due diligence up front before signing the contract. A professional liability insurance policy could protect you against claims of negligence even if you haven’t made a mistake.
What Does Errors & Omissions Insurance Cover?
Your errors and omissions insurance covers financial losses and the costs and damages resulting from law suits up to the limit of your policy. It protects your business and personal assets from claims of wrongful acts (errors, omissions or negligence) committed by you or an employee while performing professional duties. It also covers the losses that happen to others in the exercise of your professional judgment. It may also cover you for work lost in shipping. It is also possible to purchase optional endorsements tailored to your specific business, such as Media Liability and Network Security Liability. E&O insurance is a supplement to (and does not replace) Commercial Liability Insurance, Employment Practices Insurance or Directors and Officers Insurance (if your business requires that coverage).