Errors and Omissions
What is Errors & Omissions Insurance?
Errors & Omissions Insurance (also refer to as E&O Insurance and Professional Liability insurance) is a form of insurance designed to protect professionals and professional organizations from potentially significant financial loss resulting from a claim or a lawsuit for professional negligence.
Who Needs Errors and Omissions Insurance?
Professionals are viewed by clients as experts in their area of practice and can be the target of a claim. Professionals are generally defined as individuals or businesses whose services require specialized education and expertise, often defined by state or federal guidelines. Examples of professionals that need E&O insurance include:
Technology & Ecommerce Businesses
Real Estate Organizations
Investment & Financial Services
Any individual or business that provide a service to clients for a fee has a potential exposure to claims for negligence and could require E&O Insurance. Examples include event planners, website developers, and certain contractors.
Why do you need Errors and Omissions Insurance?
There is always a possibility that a professional's work may fail to meet client’s expectations, resulting in a claim or lawsuit. Regardless of fault, litigation is costly, time consuming, and damaging to a professional’s reputation.
Professional exposures vary considerably. For example, the potential for a claim and the types of claims are very different for a physician than for a marketing consultant. And the same holds true for different types of professionals within a profession. For example, a primary care physician may not have the same exposure as a surgeon. Despite the variation in exposures, all professionals are at risk of a claim or lawsuit alleging negligence, and need comprehensive E&O Insurance.
What does Error and Omissions Insurance cover?
E&O policies typically cover financial losses resulting from negligent acts, errors or omissions arising out of the provision of professional services. E&O policies also include defense costs, which can be quite substantial even if the insured is not at fault. Professional liability policies are typically written on a claims-made basis.
Unlike some insurance policies, E&O policies are generally limited to E&O coverage only. For example, most E&O policies do not include coverage for Cyber Risk exposures. General liability (GL) policies are quite different from E&O policies, and do not typically provide E&O or professional liability coverage (there are exceptions). Do not depend upon general liability policies to provide protection from claims for professional negligence without thoroughly reviewing the policy – most GL policies have an exclusion for professional services.
E&O Insurance policies have been developed specifically for the type of organization being covered, such as doctors, lawyers, insurance agents, technology developers and investment professionals. Professional services are defined in the policy and coverage is typically limited to specific professional services. For example, an accountant will not be covered for providing services as a mortgage broker.
E&O Insurance underwriters tend to specialize in certain types of businesses and become experts in their exposures and coverage needs. It is not unusual for the best price, coverage and service combination to be provided by a smaller specialty insurer with expert underwriters rather than a well-known multi-lines insurer.
What Are Common Errors & Omissions Insurance Exposures?
E&O Insurance policies cover liability incurred from negligence in the provision of services, or failure to provide services, to your clients. E&O Insurance will also cover defense costs related to litigation from allegations of negligence. However, certain types of costs are not covered (see below). Professionals of all types are being held to high standards of conduct, and lawsuits, both with and without merit, can be distracting and expensive.
What Doesn’t Errors & Omissions Insurance Cover?
All policies contain exclusions for exposures that the underwriter is not intending to cover, and E&O policies are no exception. Some of the exclusions relate to exposures that are or can be insured under a different type of policy, for example General Liability (GL). A few of the typical exclusions include:
Criminal, fraudulent & dishonest acts
Bodily injury & property damage (for certain professions)
Violations of securities, ERISA, RICO, HIPAA& similar acts
Intellectual property infringement (copyright, etc)
Liability of others assumed under contract
Employment related claims
Claims by one insured on the policy against another insured on the policy
Some types of claims are not covered, and your policy is the only determinant of coverage. You should review your E&O insurance policy with an expert to ensure that you have the coverage you expect.
What does Errors and Omissions Insurance cost?
The cost of E&O Insurance is specific to each organization and varies depending on factors such as the services provided, size of the organization, operating experience, location and claim history (if any). Underwriters look at these and a variety of other factors in selecting and pricing professional risks. Because underwriters do not all look at pricing the same way, pricing can vary between underwriters.
How can I get Errors and Omissions Insurance?
Work with us! eSpecialty Insurance provides comprehensive insurance solutions for your unique, complex, or challenging exposures. Put our expertise to work as you balance comprehensive coverage and cost. Get a quote or let us know how we can assist with your specialty insurance needs.