Errors & omissions insurance, or “E&O,” is a type of professional liability insurance. It is a claims-made type of policy. Its main purpose is to provide insureds with capital for defense costs and judgements/settlements against them if they are sued for a failure in their professional service. This could be an error, omission, misstatement, etc. in providing or failing to provide the promised professional service.

In E&O insurance, the insuring clauses set the stage. They tell you what the policy will do, who it will apply to and what specific terms you need to pay attention to. They are separate clause because they describe different types of risks and, as a result, may have different terms, conditions, limits of liability or retentions. 

You will have to consult your policy documents to confirm exactly what coverage your Errors and Omissions insurance provides but here are a few scenarios that typically would and would not be covered:

What E&O insurance covers:

Defense costs
E&O insurance will often help cover defense expenses that result from a claim made against you or your business by a customer or client who is unsatisfied with your services due to an error or mistake.
Disciplinary proceedings
Having E&O insurance can be helpful when faced with proceedings that are brought by a licensing, regulatory, or other government agency that accuse your business of professional misconduct.
Loss of earnings
Claims made by clients can lead to extensive income loss due to the amount spent at depositions and trials, E&O can help cover this loss of earnings.
Employee errors
E&O may cover claims that stem from errors made by employees, independent contractors, or temporary staff.
Claims and damages
If your case results in settlements of claims caused by services or advice provided to clients, E&O insurance may provide coverage.
Personal injury
While not always, some E&O policies may help cover the costs associated with personal injury claims. This may include claims of slander or libel.

What E&O insurance does NOT cover:

Bodily Injury/Property Damage
should be covered by GL, property, workers comp, employers liability
Products liability
should be covered by GL or a dedicated products liability policy
Securities violations
should be covered by GL or a dedicated products liability policy
should be covered by a pollution liability or environmental impairment liability policy
Employee benefits and ERISA violations
should be covered by a fiduciary liability policy
Harassment, discrimination, workplace torts
should be covered by an EPLI policy
Violation of privacy laws
when not covered as a personal injury, this should be covered by a cyber policy

E&O insurance claim examples

A homebuyer sued the agent who sold them their new home after they determined that the property which was advertised as 15,000 square feet was actually only 10,000. Different methods for measuring square footage were blamed. The suit was for $5 million and the case is currently in its second round of appeals with tens of thousands in legal costs already booked.

An urban exploration company is sued by the participants in one of its overseas tours for travel expenses, relocation costs and mental anguish after a mishap forces the company to abort mid-trip. The participants claims total $100,000 all together.

Several limited partners sued the fund after a failed investment is determined to have been made negligently, driven largely by a conflict of interest rather than intrinsic value. The LP’s also claim improperly charged fees. After spending $60,000 in defense costs, the fund settled with the LP’s for $225,000.

An advertising consultant encouraged a clothing company to rebrand, target a new market and launch an in-your-face ad campaign. The strategy failed, losing the clothing company significant market share. They were also the target of lawsuits after several groups found the ads to be offensive. After suing the consultant, the clothing company agreed to settle for $1.2 million. The consultant had incurred $125,000 in legal costs by then.

Get A E&O Quote

If you’re interested in learning more about a customized E&O insurance program, you can always reach out to a member of our team by phone 646.854.1058 or email or get a quote below!