E&O Insurance aka Professional Liability Insurance
Errors and Omissions insurance aka professional liability insurance aka E&O insurance is a type of liability coverage designed to protect traditional professionals (e.g., accountants, attorneys) and other professionals (e.g., human resource consultants, management consultants etc.) against liability incurred as a result of errors and omissions in performing their professional services.
What Does Errors and Omissions Insurance Cover & Exclude?
Errors and Omissions Insurance Coverage
Although there are a few exceptions (e.g., physicians, architects, and engineers), most errors and omissions insurance policies only cover economic or financial losses suffered by third parties, as opposed to bodily injury (BI) and property damage (PD) claims. This is because the latter two types of loss are typically covered under commercial general liability (CGL) policies. The vast majority of errors and omissions insurance policies are written with claims-made coverage triggers. In addition, errors and omissions insurance policies often contain what are known as “shrinking limits,” meaning that unlike CGL policies (where defense costs are paid in addition to policy limits), the insurer’s payment of defense costs reduces available policy limits.
Accordingly, when attempting to determine appropriate policy limits for a errors and omissions insurance policy, insureds must consider the fact that because defense costs are often a high proportion of any claim settlement or judgment, they must usually purchase additional limits. The most common exclusions in errors and omissions insurance policy forms are for bodily injury (BI), property damage (PD), and intentional/dishonest acts.
See also Accountants professional liability insurance; liability coverage; Errors and omissions (E&O) insurance; Lawyers professional liability coverage; Management liability insurance; Shrinking limits defense provision.
Does Our Company Need Errors and Omissions Insurance?
To determine whether or not your organization needs errors and omissions insurance you first need to determine whether any part of your operations could be defined as providing a service to a third party for a fee. If the answer to that questions is ” Yes” than you should connect with an ALIGNED Insurance advocate to discuss your operations and potential errors and omissions insurance for needs in more detail.