Errors & Omissions Insurance (E&O)
Professional liability coverage protecting service providers from claims of negligence, mistakes, or inadequate work.
What is E&O Insurance?
Errors and omissions (E&O) insurance, also called professional liability insurance, protects businesses and individuals who provide professional advice or services from claims alleging they caused financial harm through a negligent act, error, or omission. Unlike commercial general liability, which covers bodily injury and physical property damage, E&O addresses purely financial losses suffered by clients. Industries that commonly require E&O include financial advisors, attorneys, accountants, real estate agents, technology firms, consultants, insurance agents, and healthcare professionals. E&O policies cover legal defense costs, settlements, and judgments, usually on a claims-made basis.
Example
A financial advisor recommends an investment strategy that results in significant losses for a client, who then sues for $300,000 in damages, alleging negligent advice. The advisor's E&O policy covers legal defense costs of $120,000 and a $180,000 settlement, protecting both the advisor's personal assets and the firm's balance sheet.
Source: National Association of Insurance Commissioners — Professional Liability