Errors and Omissions (E&O) insurance is a specific type of professional indemnity insurance that protects you for certain types of liability claims. In this post we will outline what E&O insurance covers and explore which professions could benefit from this type of insurance.
What is Errors and Omissions (E&O) Insurance?
E&O insurance will cover you for claims involving allegations of errors, omissions, or professional negligence. It will also cover you for claims that your services did not meet your client’s expectations, resulting in financial loss.
If a client makes such a claim against you, E&O insurance can cover your legal fees, along with any settlements or compensation payments that may arise.
What is the Difference Between E&O Insurance and Professional Indemnity Insurance?
Professional liability insurance – or professional indemnity insurance as it is known in the UK – is very similar to E&O insurance. In fact, as many professional indemnity insurance policies cover for errors and omissions, some might even use the terms interchangeably.
Both professional indemnity and E&O policies will cover businesses for financial losses arising from errors, or allegations of negligence. E&O insurance policies, though, may be specifically designed to meet the cover requirements of businesses in the technology, finance, and consultancy sectors.
What Does E&O Insurance Cover?
If you provide consultancy services, or if you manage your clients’ finances, then your clients will put a lot of trust into your insights and expertise. If something goes wrong, and your clients make a financial loss, then they might make a claim against you.
This is where your E&O insurance will prove invaluable. If the client’s claim is successful, then your insurance will cover any settlements or compensation they may be due. But crucially, E&O insurance will also cover your legal fees throughout the proceedings.
Even if the client’s claim is unfounded, and even if the court rules in your favour, legal fees can soon ramp up. E&O insurance will give you peace of mind that everything will be covered in the unlikely event of a liability claim from a dissatisfied client.
What Types of Errors and Omissions Are Covered?
An E&O insurance policy might cover claims involving allegations of:
- Errors or Omissions – As the name suggests, the policy can cover alleged mistakes or oversights that result in financial losses.
- Negligence – This might include allegations of poor work or misrepresentation, or a failure to meet industry standards. In the creative fields, this could also include cases where you inadvertently breach another business’s intellectual property rights.
- Defamation – If you make a statement that damages another individual or business’s reputation.
- Breach of Trust or Contract – If you accidentally break a confidentiality agreement or disclose sensitive information. Or, if you miss deadlines, fail to deliver work, or otherwise breach the terms of your contract.
Who Needs E&O Insurance?
Unlike Professional indemnity insurance, a dedicated E&O insurance policy may be tailored to suit the specific cover and regulatory requirements for businesses in the tech, finance, and consultancy sectors.
This might include any role that involves providing professional services or advice, including:
- Accountants
- Financial advisors
- Software developers
- Estate agents
- Law firms
- Engineers, architects, and surveyors
- Creative roles, including graphic designers and digital marketers
How To Ensure You Have The Right Level of E&O Insurance Cover
Claims involving allegations of errors and omissions can often prove substantial, especially when you factor in the legal costs.
It is essential to ensure that your E&O insurance policy’s specified limits will cover you for all possible claims. The amount of cover you need will depend on your industry and its regulatory requirements, along with the size of your business, and the types of clients you work with.
James Hallam is an independent Lloyd’s broker with a dedicated team of experienced insurance professionals who care about protecting your business. We can help you get exactly the right level of E&O insurance cover you need at a competitive price.