What Is Errors & Omissions Insurance? Does My Business Need It?

Errors & Omissions (E&O) insurance is sometimes referred to as Professional Liability. It provides protection for your business against liability for errors or omissions committed while fulfilling your professional services. Simply put, Errors & Omissions insurance provides coverage when lawsuits are brought against your business for negligence, mistakes, or inadequate work.

“But doesn’t my General Liability policy already cover me for that?”

A General Liability policy protects your business against liability from bodily injury and property damage. This could be things like slips, trips, and falls on your premises or something like an employee causing damage to a client’s property while they are performing work in the client’s home. However, a General Liability policy typically does not respond in the event of claims of negligence or inadequate work that cause financial damages.

E&O insurance is designed to cover professionals whose services could leave their client financially worse off if the professional commits an error, misspeaks, or does a poor job while providing their services. This could include people or businesses who provide services like consulting, advising, designing, and manufacturing. Let’s look at a couple of examples:

Technology Professionals

Many businesses rely on technology professionals to manage the business’ computer systems and keep them operational. Let’s imagine that the IT provider fails to install an important software patch for the client’s system. This system vulnerability allows the client downloads a virus that results in their system becoming inoperable. The client can’t recover their customer orders and are forced to suspend operations. The client could sue the IT provider for negligence that caused their financial damages.

Manufacturers

Suppose a manufacturer is responsible for producing a part that goes into a finished product that is assembled by their customer. The part is faulty and doesn’t work as intended. Because the part is not usable by the customer, they’re not able to assemble the finished product and the resulting delay causes a financial loss to the customer.

There are many other professionals that may need E&O insurance including attorneys, CPAs, real estate agents, architects, and graphic designers.

Lawsuits can happen whether the claim is legitimate or not and having E&O insurance can help provide protection against these financial losses. Call your agent today to discuss whether your business needs E&O insurance and what the next steps are to obtaining it.