Errors and omissions insurance protects professionals against claims that their mistakes, bad advice, or missed actions caused a client financial harm. It is a form of professional liability insurance focused on service errors rather than bodily injury or damage to physical property.
What the coverage is for
E&O insurance is commonly bought by:
- insurance agents and brokers
- consultants
- accountants
- real estate professionals
- technology and design firms
- financial professionals
Typical allegations include failure to procure requested coverage, giving incorrect advice, missing a filing deadline, or making a professional error that causes the client to lose money.
Claims-made logic
Most E&O policies are written on a claims-made basis. That means timing is critical. The claim usually must be made and reported during the policy period, and the wrongful act must fall on or after any applicable retroactive date.
Coverage usually includes defense costs, settlements, and judgments up to policy limits, subject to deductibles and exclusions. Fraud, intentional wrongdoing, and bodily injury claims are often excluded or handled under other policies.
Practical example
A business asks its insurance broker to add cyber coverage at renewal. The broker neglects to place the endorsement, and the client later suffers a breach with no cyber coverage in force. The client sues the broker for the uncovered loss. The broker’s E&O policy may respond because the alleged harm came from professional negligence, not from direct property damage caused by the broker.