Errors & Omissions Insurance

Errors and omission (E&O) insurance, also known as Professional liability, covers companies in third-party or client lawsuits claiming substandard work or service. Work errors or oversights, missed deadlines, budget overruns, etc., often result in costly cases — but E&O insurance responds to these mishaps.

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Who is Errors & Omissions Insurance for?

Companies that perform a professional service for another party — consulting, marketing, hosting, developing, processing, advising, managing, auditing, reporting, administering, to name a few — run the risk that the other party will claim they suffered financial loss due to a failure in your service.

The types of operations that need professional liability coverage to mitigate their risk are almost too many to count:

Venture Capital

VC’s that offer investment management services to their limited partners

Consultants

Consulting firms that offer cyber security auditing and guidance

Media & Advertising

Advertisers that manage programmatic campaigns for their clients

SaaS Marketplaces

Digital marketplaces connecting customers and vendors

Software Developers

Programmers who build custom API’s made-to-order

Why you need Errors and Omissions Insurance

Summary

Known primarily as errors and omission (E&O) or professional liability insurance, this coverage has also been dubbed “malpractice” insurance. General liability and E&O insurance protect companies from third-party liability allegations. However, only E&O insurance focuses solely on financial loss instead of bodily injury or property damage as general liability does. E&O covers third-party financial loss arising from two factors: 1.) the insured’s product or service’s substandard performance and, 2.) an insured’s act, error, or omission during the performance of client services.

Consider a customer unable to log into your client-onboarding SaaS platform for a few days due to a bug in your technology. The lockout causes your customer to miss out on new business opportunities for that week. E&O insurance would respond to this particular claim, whereas general liability wouldn’t since there was no physical injury or property damage.

Reasons for getting E&O Insurance
file copyright tm Protects against third-party claims (i.e., slander, copyright infringement)
ddos attacks Protect against financial damages due to human error or oversights
legal Covers costs of client lawsuits alleging inferior work
Human Error

Regardless of how well your company performs its services, humans still make the gears turn — but humans make mistakes. Human error accounts for much past litigation.

Dissatisfied Customers

Although the customer is right most of the time, some might blame your product or service for their financial suffering. Even if the lawsuit holds no merit, defense fees add up quickly.

Risk Management

No matter how meticulous you manage your company or its products/services, some things are out of your control. E&O insurance protects your business when you or an employee are accused of making a mistake

What Does Errors & Omissions Insurance Cover

Errors & Omissions (E&O) insurance is a type of professional liability insurance. Included within the professional liability category of business insurance are miscellaneous professional liability, technology E&O, and medical or legal malpractice policies. Technology E&O and cyber liability coverages are often packaged together since the two types of claims tend to intertwine.

Essentially, if you claim that your product or service will perform in a way that would be expected based on industry standards and your customer decides that claim was unfounded, errors & omissions insurance would step in to protect you from the lawsuit. The policy does this by paying your defense costs as well as settlements and judgments against your company; it’s malpractice insurance.

Defense Costs

E&O insurance will often help cover defense expenses that result from a claim made against you or your business by a customer or client who is unsatisfied with your services due to an error or mistake.

Disciplinary Proceedings

Having E&O insurance can be helpful when faced with proceedings that are brought by a licensing, regulatory, or other government agency that accuses your business of professional misconduct.

Loss of Earnings

Clients’ allegations can lead to extensive income loss due to the amount spent at depositions and trials; E&O can help cover this loss of earnings.

Employee Errors

E&O may cover claims that stem from errors made by employees, independent contractors, or temporary staff.

Claims and Damages

If your case results in settlements of claims caused by services or advice provided to clients, E&O insurance may provide coverage.

Personal Injury

While not always, some E&O policies may help cover the costs associated with personal injury claims, including slander or libel claims.

E&O Insurance Claim Examples

Here are some claim examples that illustrate what Errors & Omissions Insurance covers

A homebuyer sued the agent who sold them their new home after they determined that the property which was advertised as 15,000 square feet was actually only 10,000. Different methods for measuring square footage were blamed. The suit was for $5 million and the case is currently in its second round of appeals with tens of thousands in legal costs already booked.

Several limited partners sued the fund after a failed investment was determined to have been made negligently, driven largely by a conflict of interest rather than intrinsic value. The LP’s also claim improperly charged fees. After spending $60,000 in defense costs, the fund settled with the LP’s for $225,000.

An urban exploration company is sued by the participants in one of its overseas tours for travel expenses, relocation costs and mental anguish after a mishap forces the company to abort mid-trip. The participants’ claims totaled $100,000 altogether.

An advertising consultant encouraged a clothing company to rebrand, target a new market and launch an in-your-face ad campaign. The strategy failed, losing the clothing company significant market share. They were also the target of lawsuits after several groups found the ads to be offensive. After suing the consultant, the clothing company agreed to settle for $1.2 million. The consultant had incurred $125,000 in legal costs by then.

Errors & Omissions Insurance FAQs

E&O claim limits vary significantly from company to company. Some opt for $250,000 per occurrence, while others request up to $2 million per occurrence. On that same note, most companies won’t settle for less than $1 million aggregate, but others want $5 million aggregate.

More often than not, the premium is a function of company revenue. Changes in revenue will often be the driving factor for increase or decreases in cost on renewal.

How carriers determine premium depends entirely on the industry, for example:

  • Tech E&O policies may look at revenue in conjunction with monthly average users. 
  • Allied health/malpractice premiums will be guided by the number of covered care providers.
  • A tour guide’s E&O policy may be rated on “hours”: hours per tour x number of customers per tour x number of tours per year.

It’s difficult to give an estimated premium as so many variables come into play. Other factors also include:

  • Location
  • Claims history
  • Policy limits

Products liability coverage and general liability (GL) insurance policies protect companies from liability to third parties that results from the use of your product. However, E&O focuses purely on financial losses, not bodily injury or property damage as is the case with GL insurance. (The exceptions to this rule include medical malpractice insurance as well as E&O policies with “contingent bodily injury/property damage” coverage enhancements).

Many carriers will customize an E&O policy; however, some of the most prominent enhancements include:

  • Various defense cost reimbursement
  • Contingent bodily injury/property damage
  • Record retention
  • Zero dollar deductible
  • Deposition expense reimbursement
  • Various expanded limits

  • Bodily injury or property damage
  • Products liability
  • Securities violations
  • Pollution
  • Employee benefits and ERISA violations
  • Harassment, discrimination, and workplace tort
  • Violation of privacy laws

How it works

Finding insurance coverage doesn’t have to be painful. We aim to make the purchasing experience as streamlined & intuitive as possible.

1
Get a quote

Use our custom built online portal to get quotes fast. We automate clerical tasks that plague the traditional insurance brokerages, giving us more time to be responsive and alert to your company’s needs.

1
Get a quote

Use our custom built online portal to get quotes fast. We automate clerical tasks that plague the traditional insurance brokerages, giving us more time to be responsive and alert to your company’s needs.

2
Pair with a specialist

No two organizations are the same. Our team of coverage experts partners with your team to engineer your risk management strategy, together. We take the time to understand the intricacies of your company to get you the best possible coverage.

2
Pair with a specialist

No two organizations are the same. Our team of coverage experts partners with your team to engineer your risk management strategy, together. We take the time to understand the intricacies of your company to get you the best possible coverage.

3
Stay one step ahead

To do better, you need to know better. With changing political, technological, legal and economic landscapes, staying ahead of the curve is critical.

Our in-house team is tapped into the latest developments of your industry, proactively ensuring you’re covered.

3
Stay one step ahead

To do better, you need to know better. With changing political, technological, legal and economic landscapes, staying ahead of the curve is critical.

Our in-house team is tapped into the latest developments of your industry, proactively ensuring you’re covered.

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