A Guide to Errors and Omissions Insurance

As a business owner — or self-employed individual — who provides professional services, it’s important to safeguard your business against a range of potential claims that could threaten long-term financial stability. If a client or customer claims that they incurred financial losses due to your company’s errors, omissions, or other forms of neglect, professional liability insurance can offer essential coverage.

In fact, Errors and Omissions (E&O) Insurance is a type of professional liability insurance that is designed to cover potential damages associated with product glitches, service interruptions, and poor performance. At Doeren Mayhew Insurance Group, we understand that while mistakes at work happen, they can turn out to be wildly expensive.

We deliver customized commercial insurance solutions to protect business owners and their employees against high-stakes claims of costly errors or omissions. Our guide should provide a better understanding of what E&O insurance is, who needs it, what is covered, and what is not.

What is Errors and Omissions Insurance?

A company could be held liable for millions of dollars in damage and steep legal fees when facing claims of neglect or inaction. E&O insurance is a type of professional liability insurance that offers coverage to protect businesses against costly claims that its services — or failure to perform them — caused damage or financial losses. While these claims vary by business type and services rendered, the following are common claims stemming from professional mistakes:

  • Incorrect diagnosis
  • Lack of informed consent
  • Administrative error
  • Faulty workmanship
  • Missed deadline
  • Failure to disclose
  • Breach of contract
  • Service interruptions
  • Misrepresentation

Who Needs Errors and Omissions Insurance?

Any specialized professional who offers services for a fee could benefit from securing E&O insurance. Because these professionals are vulnerable to a variety of liability risks associated with the services they offer, some states have mandated the purchase of E&O insurance as part of a business’ commercial insurance plan.

From the individuals in the financial industry to nonprofit organizations, a number of professionals and business types should consider E&O to ensure long-term protection against claims of negligence, including the following:

  • Media companies
  • Web-based businesses
  • Public relations and advertising firms
  • Engineering firm
  • Hospitals
  • Real estate agencies
  • Architectural firms
  • Marketing consultants
  • Accounting firms
  • General contracting business

What is Covered by Errors and Omissions Insurance?

This type of insurance will deliver peace of mind to any professional who has the potential to face claims that work mistakes, oversights, and negligent acts were directly related to a client’s financial losses. E&O policies typically provide coverage for judgments, legal fees, court costs, and settlements per the limits of the insurance plan.

What is Not Covered by Errors and Omissions Insurance?

While E&O covers expenses related to claims of errors and omissions, it does not provide coverage for things such as damage-related claims nor intentional wrongdoing. Be sure to review the exclusions of an E&O policy to ensure the areas in which you or your business are exposed are covered. Typical E&O exclusions include the following:

  • Illegal acts
  • Bodily injury
  • Property damage
  • Financial insolvency
  • Claims from events occurring before policy date
  • Product liability
  • Securities violations
  • Harassment, discrimination, and workplace torts
  • Violation of privacy rights
  • Copyright infringement

At Doeren Mayhew Insurance Group, we guide business owners and self-employed professionals like you through the process of selecting the right commercial insurance solutions for your unique areas of liability exposure. Contact us to learn more about the benefits of securing Errors and Omissions Insurance, or to schedule a customized consultation today.