Errors and omissions insurance (often referred to simply as E&O insurance) is a form of professional liability coverage for businesses that offer advice or services. The policy protects the insured against any claims that a client suffered financial loss or the policy holder failed to perform due to negligence. It is not uncommon for general liability insurance companies to exclude this coverage from their standard policies, so it must typically be quoted separately.
Exactly Who Needs E&O Insurance?
The fields that are traditionally associated with professional liability insurance are the medical, legal and financial professions, although the name “errors and omissions insurance” is not used for medical policies (replaced instead by “malpractice insurance”). The standard E&O insurance policy is also necessary for many construction and maintenance contractors as well as professionals in the transportation industry. This is due to their high exposure to failure to perform claims.
Why Isn’t It Part of General Liability Coverage?
With the wide range of businesses that require errors and omissions coverage, it is only natural to ask “why isn’t errors & omissions insurance included in general liability?” The reason is because, by definition, commercial general liability insurance only covers claims involving personal, bodily, and advertising injury, or property damage. Claims stemming from erroneous legal or financial counseling, or some failure to perform according to a contract, do not fall into any of these categories – thus the need for a separate policy.
Are There Gaps in Errors and Omissions Policies?
Unfortunately, gaps in E&O insurance policies are quite common due to the very specific, unique types of activities that certain businesses engage in. Because all errors and omissions policies operate on a claims-made basis (i.e. coverage is against claims made during a set time frame), it is also possible for there to be gaps in coverage when policies are being renewed, changed, etc.
Is E&O Insurance Expensive?
The exact cost of carrying errors and omissions coverage will obviously depend on the type of business being insured, and the amount of coverage involved. With that said, average rates range from around $80 to $250 per month.
As is the case with any type of insurance, finding an affordable rate on a policy that provides your business with adequate coverage will involve a little bit of shopping around. Doing this online is an excellent alternative, since it will allow you to get quotes from a range of carriers and compare them at your leisure. The most important part of this process will be ensuring that the E&O insurance policies you are having quoted cover the risks associated with your specific business.