Errors and Omissions Insurance Frequently Asked Questions

A  common question we hear from customers is, “What is E&O insurance coverage?” It’s a common question we get and we’re here to help answer it. Errors and omissions (E&O) insurance helps protect your company if someone claims you made a mistake in the professional services you provided. One errors and omissions claim example is an accountant giving a client bad advice, resulting in them losing a large amount of money.

Some states and licensing boards may require certain types of businesses to have E&O insurance. Some types of businesses that can also benefit from this insurance include:

 

Errors and omissions insurance helps cover your legal expenses and settlement costs if a client claims that you didn’t deliver on promised services. Even if you didn’t cause the client any financial loss, you can still be held liable if a customer believes you made a mistake. Errors and omissions insurance can help cover your court costs, like attorney fees and your loss of earnings if you must spend time away from your business to be at depositions or trials.

There are many different reasons that a business owner may need errors and omissions insurance. E&O insurance can help pay for the following claim costs:

 

While it’s not a requirement to have errors and omissions insurance, it can help you avoid having to pay out of pocket for expensive lawsuits that could come up when you least expect it. Although your state might not require you to have E&O insurance, there may be situations where you’ll need it. Certain industries may require your business to have some form of errors and omissions insurance. For example, your client could require you to have E&O coverage as a part of a contract before work starts. Your industry could also require this coverage due to federal regulations.

The main difference between general liability and errors and omissions coverage is the types of risks they cover. General liability insurance covers physical risks, such as bodily injuries and property damage. While E&O insurance covers more abstract risks, such as mistakes in the services your business provides. To make sure your business is more fully protected, it’s a good idea to carry both types of insurance.

Errors and omissions insurance can help protect against claims of:

 

If you breach a contract intentionally, your insurance will not protect you. If a breach of contract lawsuit results from a mistake or oversight in the professional services you provided, your E&O insurance can help protect you. Some clients may ask you for proof of professional liability insurance, or errors and omissions insurance, before they agree to enter a contract with you. 

No, errors and omissions insurance doesn’t cover cyber liability lawsuits. You’ll need to have cyber liability insurance coverage to best protect your business from risks associated with cyberattacks and data breaches. Many small business owners start with a Business Owner’s Policy (BOP) and bundle it with errors and omissions insurance and cyber liability insurance.

E&O insurance doesn’t cover intentional, fraudulent or criminal acts that caused your client harm. It also doesn’t cover all types of liability claims, like bodily injuries. For example, if someone sues your business after a slip and fall in your store, your E&O insurance won’t help. Instead, you’ll need general liability insurance coverage to help cover bodily injuries and property damage claims.

Most insurance companies write an errors and omissions insurance policy on a claims-made basis with a retroactive date and extended reporting period. The retroactive date means that you’re covered for incidents that happen on or after a specified date in your policy. The extended reporting period helps cover claims filed within a certain time after your policy expires. This is generally a 30 to 60 day period, but you can extend this period to a year or more for an additional cost.

Mistakes and accidents can happen when you least expect it. Some common E&O claim examples include:

 

Yes, errors and omissions insurance coverage can help protect your business even if the claim against your business is determined to be baseless. It can help provide coverage for claims of negligence in a lawsuit against your business, even if you didn’t do anything wrong.

It’s common for E&O policy periods to last one year, but the retroactive date will define your coverage of claims during the specified timeframe.

Your E&O insurance policy with The Hartford can be adjusted to meet your specific industry needs. You can work with our specialists to get the right amount of errors and omissions (E&O) insurance coverage for your business. We can also help you bundle your coverage with other types of insurance to make sure you’re more fully protected.

Errors and omissions insurance costs will vary depending on factors like product type, limits chosen and risk class or hazard group of your industry. On average, our customers paid about $76 a month for standalone professional liability coverage.** Keep in mind that different industries may see higher costs for insurance because of the risk class associated with the work you do. For example, healthcare professionals’ minimum average monthly premium was $132 for errors and omissions insurance.**

Factors that can impact your errors and omissions insurance cost include:

 

Determining your coverage limits for errors and omissions (E&O) insurance will depend on factors like the size of your business, industry and your exposure to risks. You may also want to consider what your business is able to afford out-of-pocket if you’re sued by a client. If you’re unsure about what your coverage limits should be, you can work with our specialists to find the right amount of coverage needed for your business.

The errors and omissions claims process may seem complicated, but it doesn’t have to be if you follow the right steps:

 

If you don’t reach a settlement outside of court, your claim will go to trial. Your E&O policy can still help pay for your legal defense costs. However, a jury will decide if the client that’s suing you will receive a settlement and for how much.

Reducing your exposure to professional liability or errors and omissions risks may help prevent your business from being involved in costly lawsuits and claims. Here are six ways you can reduce the risk of errors and omissions exposures in your business: