Errors & Omissions (E&O)
Plain English
Errors and omissions insurance, or E&O, is professional liability coverage for claims that your advice or services caused a client a financial loss, such as a mistake, an oversight or inaccurate advice. It pays your legal defense and settlements up to the limit. It's separate from general liability, which covers bodily injury and property damage.
Read to the end to complete this term.
On this page
Definition
Errors and omissions insurance, often shortened to E&O, is a form of professional liability coverage that protects a business or individual professional against claims that a mistake, oversight, or failure to perform professional services caused a client financial harm. Unlike general liability, which addresses physical injury or property damage, E&O specifically addresses financial losses tied to the quality or outcome of professional advice, services, or work product. It's commonly carried by consultants, accountants, real estate agents, insurance agents, and technology service providers, and is usually written as a claims-made policy.
Why It Matters
Any business that provides advice, expertise, or a professional service can face a claim that its work fell short, even when the business believes it did everything right, and legal defense costs alone for these claims can be significant regardless of the outcome. Many client contracts specifically require proof of E&O coverage before work can begin.
Real-World Example
Say a bookkeeper misses a client's tax deadline, and the client claims $25,000 in penalties and lost interest. General liability wouldn't respond, because no one was injured and no property was damaged. The bookkeeper's E&O policy defends the claim and pays the agreed settlement, less the deductible, up to its limit.
Personal vs. Commercial
For businesses: Businesses closing, merging, or switching E&O insurers should evaluate whether tail coverage is needed, since the claims-made structure means past work can go uninsured if the policy simply lapses without that extra step.
Common Misconceptions
- People sometimes assume general liability covers professional mistakes, when general liability is generally focused on physical injury and property damage, not financial harm from professional advice or services.
- It's sometimes assumed E&O only applies to obviously "professional" fields like law or medicine, when many service-based businesses, including consultants, marketers, and technology providers, can benefit from this coverage.
- Some think being confident in your own work means you don't need E&O coverage, when even well-performed work can lead to a claim if a client is unhappy with the outcome or disagrees about what was promised.
- People sometimes believe E&O coverage applies retroactively to any past work once purchased, when many E&O policies are claims-made and include a retroactive date that limits which past incidents are actually covered.
Key Takeaways
- E&O covers claims that professional advice or services caused a client financial harm, distinct from general liability's focus on physical injury or property damage.
- Almost any business providing expertise or professional services can face this kind of claim, not just doctors and lawyers.
- E&O policies are commonly written on a claims-made basis, which affects how coverage works if you switch insurers or close the business.
- Many client contracts require proof of E&O coverage before work begins.
Frequently Asked Questions
What does E&O insurance cover?
Claims that your professional work caused a financial loss: negligence, misrepresentation, inaccurate advice and similar errors, including defense costs.
Is E&O the same as professional liability?
Yes. Triple-I says professional liability insurance is also known as errors and omissions insurance.
Is E&O claims-made?
Most professional liability policies are claims-made, so the policy must be in force both when the event happened and when the claim is filed.
What doesn't E&O cover?
Typically intentional wrongdoing, bodily injury and property damage (general liability), and employee injuries (workers' comp).
Related Terms
Related Coverages
- Errors & Omissions Insurance
- Professional Liability Insurance
Related Scenarios
Explore the rest of the Business Insurance category.
Browse Business Insurance terms →Sources
The factual claims on this page were checked against these sources. Rules and figures change, so check the source itself if you need to confirm the current version.
- iii.orgProfessional liability insurance · Insurance Information Institute (Triple-I)
Educational information, not advice: This page is for general education only, not legal, financial, or insurance advice. Actual coverage, discounts, and requirements depend on your policy’s wording, your insurer, and the laws of your state. Confirm specifics with your own insurer or a licensed agent before making a decision. Insurpedia does not sell insurance and does not recommend specific insurers.