Errors & Omissions Insurance
What Is Errors & Omissions Coverage?
Errors and omissions (E&O) coverage is a type of insurance that covers harm you unintentionally cause others due to mistakes (errors) and oversights (omissions) in your services.
This coverage is also known as professional liability insurance.
What Does Errors & Omissions Insurance Cover?
E&O insurance covers expenses related to claims and lawsuits that stem from accusations of negligence, inaccurate advice, and other mistakes.
E&O typically covers claims and lawsuits related to:
- Errors: Mistakes made while providing services that lead to a financial loss for a client
- Omissions: Failing to act or leaving out important information that leads to a client’s loss
- Inaccurate advice: Unintentionally providing wrong, inaccurate, or misleading advice (believed to be true at the time) that leads to harm or damage
- Negligence: Carelessness or a lack of reasonable care in your services that results in harm or damage
- Unmet client expectations: Real or imagined failure to deliver results that were guaranteed
Legal expenses typically covered by E&O insurance include:
- Arbitration costs
- Attorney fees
- Other court costs
- Financial settlements
Errors and omissions insurance covers these same expenses, whether or not you’re at fault — as long as the original incident happened because of a covered error or mistake.
Examples:
An education consultant creates a customized curriculum that fails to meet a client’s academic goals, leading to dissatisfaction and a lawsuit.
A marketing consultant mistakenly provides poor advice for a new product launch based on dated tactics, causing a business to lose money on the product launch. The business files a claim against the agency for losses on the campaign.
A personal trainer leaves a client alone to grab another piece of equipment while the client is performing barbell back squats. The client sustains an injury that forces them to miss two weeks of work. Since the trainer wasn’t there to spot them, they accuse the coach of negligence and sue for their lost wages.
What Does Errors and Omissions Insurance Not Cover?
| Not Covered by E&O Insurance | Why It’s Not Covered | Coverage to Get Instead |
|---|---|---|
|
Third-party bodily injury or property damage |
E&O covers professional mistakes, not physical accidents. |
General Liability: Covers slip-and-fall accidents, damage to client property, and related claims. |
|
Employee injuries |
E&O doesn’t protect your staff if they get hurt on the job. |
Workers Compensation: Covers medical bills and lost wages for employees. |
|
Damage to your business property |
E&O does not cover your business gear, equipment, or tools. |
Inland Marine (aka Tools & Equipment): Protects your tools, supplies, equipment, and inventory in transit and on the job. |
|
Intentional or illegal acts |
Fraud, illegal actions, and deliberate harm are never insurable. |
None. Businesses are legally responsible for intentional wrongdoing. |
|
Cyberattacks or data breaches |
E&O doesn’t cover lost data or hacked systems. |
Cyber Liability: Helps with data recovery, customer notifications, and legal costs. |
|
Theft or dishonesty by employees |
E&O doesn’t cover fraud or theft committed by employees. |
Fidelity Bond: Covers client losses from employee theft or fraud. |
Who Needs Errors & Omissions Coverage?
Any business or individual who sells advice, information, or knowledge-based services needs errors and omissions insurance. Many clients also require this coverage before they’ll agree to hire you.
Errors and Omissions vs General Liability: What’s the Difference?
Errors and omissions insurance applies to claims and lawsuits involving financial harm related to professional mistakes, bad advice, or negligence. Typical claims include accusations of negligent behavior or bad advice. Consultants, trainers, coaches, and other service professionals benefit most from this coverage.
General liability insurance applies to claims involving physical harm (bodily injury and property damage). Typical claims include damaged client property and slip-and-fall injuries. Anyone who works with the public (aka other people) should have this coverage.
Both coverages apply to claims from third parties (third parties = others). They do not apply to injury or other harm done to you.
Additional Resources
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