Professional Liability (Errors & Omissions) Insurance
Embroker helps business owners get the right professional liability insurance to properly protect your business from civil lawsuits for negligence, common mistakes, malpractice, misrepresentation claims, and more.
Errors & Omissions Insurance
Protect your business from employee error. Get a quick quote, and get insured.
What Is Professional Liability Insurance?
Professional liability insurance is commonly known as errors and omissions (E&O), professional indemnity, or malpractice insurance. They all refer to insurance that keeps you and your company protected from civil lawsuits for negligence, common mistakes, omissions, misrepresentation claims, and more.
Professional liability insurance is typically the first policy purchased by anyone providing professional services (lawyers, accountants, consultants, etc.) as they realize these claims can be among the most expensive.
If you already have general liability insurance, you may think that you don’t need professional liability coverage. However, many liability policies only cover bodily injury, personal injury or property damage, so the most likely of claims (i.e. those related to your services) do not fall under the GL umbrella.
For example, professional liability can cover you if a customer chooses to file a claim against you related to a service that you either failed to provide entirely or sufficiently. To clarify, if a service you performed did not have the expected or reasonable results in the eyes of your client, you could be sued.
This means that businesses and professionals operating in industries that require specific expertise will find that general liability insurance policies won’t offer protection against claims that stem from their professional practices – such as malpractice, negligence, or misrepresentation.
In the medical and healthcare industry, when talking about doctors, chiropractors, dentists, and nurses, this type of insurance is often called malpractice insurance.
A good professional liability policy will be able to cover all of the costs of your defense, as well as your judgments or settlements.
Difference Between General And Professional Liability Insurance
Business owners are often confused about whether they need both the general and professional liability policies. However, the truth is that the exposures the two policies will cover are fairly different, and there’s minimal overlap between them.
General liability insurance will provide broad coverage for claims of bodily injury and property damage resulting from your products, services, or operations.
Professional liability insurance will protect your business from claims explicitly related to the professional services or advice you offer.
For instance, if someone slips and falls on your premises, your general liability policy will respond. If a client decides to sue because the service you provided didn’t have the promised results, your professional liability policy will cover the legal expenses and settlements.
Who Is E&O Insurance Coverage For?
E&O insurance is particularly useful for any business that offers professional services, whether they’re a large firm, small business, or one-person operation. These policies are important and sometimes required for businesses in many industries.
However, some industries need professional liability insurance coverage more than others. Here are some examples:
-
-
- Accountants and CPAs are responsible for managing and reporting on their clients’ financial matters. Errors or negligence in financial reporting, auditing, or tax filing can lead to serious consequences for clients, such as financial losses, penalties, or legal issues. Professional liability insurance protects accountants and CPAs from bearing the full cost of legal defense and settlements in case of mistakes.
- Example: If an accountant makes a mistake in a client’s tax return, leading to an IRS audit and penalties, professional liability insurance would cover the legal costs and damages. This coverage is essential for accountants and CPAs, as even minor mistakes can result in significant financial repercussions for their clients
-
-
-
- Bookkeepers and tax preparers handle sensitive financial information and are responsible for maintaining accurate records and preparing tax returns. Mistakes in financial record-keeping or tax preparation can result in costly consequences for clients, like missed tax deductions, penalties, or audits. Professional liability insurance shields bookkeepers and tax preparers from the financial consequences of potential lawsuits.
- Example: If a bookkeeper fails to properly categorize expenses, causing a client to miss out on tax deductions and incur a higher tax liability, professional liability insurance would cover any resulting financial losses. This coverage is crucial for bookkeepers and tax preparers, as their work directly impacts their clients’ financial well-being.
-
-
-
- Consultants provide expert advice and recommendations to clients across various industries. Clients rely on this advice to make important business decisions, invest in projects, or implement strategies. If a consultant’s advice or recommendations lead to financial losses or legal issues for the client, the consultant may face a lawsuit. Professional liability insurance protects consultants from the financial consequences of such claims.
- Example: If a consultant advises a client to invest in a venture that fails, resulting in significant losses, professional liability insurance would cover legal costs and settlements. This coverage is vital for consultants, as their professional opinions and guidance can have far-reaching effects on their clients’ success.
-
-
-
- Real estate agents facilitate property transactions and are expected to provide accurate information about properties, zoning, and contracts. Misrepresentations or omissions about a property’s condition, legal status, or other important factors can lead to financial losses or legal disputes for clients. Professional liability insurance safeguards real estate agents from the cost of legal defense and settlements in such cases.
- Example: If a real estate agent fails to disclose known defects in a property, leading to costly repairs for the buyer, professional liability insurance would cover legal expenses and damages. This coverage is essential for real estate agents, as they are often involved in high-value transactions where mistakes can have substantial financial consequences.
-
- Home Inspectors
-
-
- Home inspectors assess the condition of properties and provide reports to potential buyers or sellers. Overlooking or misreporting issues during a home inspection can result in significant financial losses for clients, as they may purchase a property with hidden defects or face unexpected repair costs. Professional liability insurance protects home inspectors from bearing the full financial burden of legal claims related to their inspections.
- Example: If a home inspector fails to identify a significant structural problem, resulting in expensive repairs for the homeowner, professional liability insurance would cover legal costs and settlements. This coverage is crucial for home inspectors, as their reports are relied upon to make informed real estate decisions.
-
- IT and Technology Professionals
-
-
- IT and technology professionals develop, implement, and maintain systems, software, and networks for clients. System failures, data breaches, or software glitches can lead to significant financial losses, legal issues, or reputational damage for clients. Professional liability insurance protects IT and technology professionals from the cost of legal defense and settlements in case of such incidents.
- Example: If an IT professional’s software recommendation leads to a data breach and client financial losses, professional liability insurance would cover legal expenses and damages. This coverage is essential for IT and technology professionals, as the systems and solutions they develop and maintain are critical to their clients’ operations and security.
-
- Healthcare Professionals
-
- Healthcare professionals, such as doctors, nurses, and therapists, provide medical care and treatment to patients. Medical malpractice, misdiagnosis, or treatment errors can have severe consequences for patients, including worsened health conditions, additional medical expenses, or even loss of life. Professional liability insurance, also known as medical malpractice insurance, protects healthcare professionals from the financial burden of legal claims related to their professional services.
Example: If a healthcare professional makes a diagnostic error that leads to a patient’s worsened condition, professional liability insurance would cover legal costs and settlements. This coverage is vital for healthcare professionals, as the nature of their work involves high-stakes decisions and procedures that directly impact patient well-being.
These professions require specialized education or training, and their practice must meet certain state, industry, contract, or client standards. Oftentimes, the professional is licensed for their trade. Compromised standards or not living up to the standard of care can lead to expensive legal defense costs or even litigation which will put your company assets at risk and can even endanger your personal assets.
Really, any small business or large corporation that is providing a service to a client for a fee should look into E&O coverage, whether you’re a dentist, a beautician, or a wedding planner.
Ask yourself:
- What is the material impact my services have on my clients and what if I make a mistake or upset a client?
- Are my clients ever at risk of monetary damages if I make a mistake or give bad advice?
- Is there a lot of variation in the services I provide from person to person?
- Do I ever make suggestions or claims that could be construed incorrectly?
If you’re answering “yes” to these questions, you should have a professional liability policy. Click the ‘Get Started’ button above to get your instant professional liability insurance quote in just a few minutes.
Why Do You Need Errors & Omissions Insurance?
No matter how good you are at doing your job and how long you have been doing it, you are bound to make a mistake every now and then or have a disgruntled client. E&O coverage protects you in the case that you do make a mistake that a customer decides to sue you over.
For example, if your client in Springfield, Massachusetts needed important products shipped to him for the grand opening of his store, but your company shipped them to Springfield, Illinois instead, you can expect a lawsuit from that customer.
In some instances, E&O claims aren’t even related to money. A claim can be made for less tangible issues, such as loss of reputation or emotional distress.
What Does a Professional Liability Insurance Policy Cover?
A preferred professional liability policy will cover your defense costs, as well as damages you are ordered to pay and settlements reached in and out of court.
What is most important to take into consideration when discussing what an E&O policy covers, is that these errors and omissions need to be unintentional in order for the insurance to pay claims on the policy.
Some of the unintentional acts of negligence that E&O insurance covers include:
How Professional Liability Insurance Works
As already mentioned, most E&O policies are claims-made policies, meaning that the policy must be active both when the alleged issue occurred and when the claim was filed.
It’s important to note that even if a claim arises and you properly report the matter, you may not be covered if the actual service occurred before the retroactive date. The retroactive date typically coincides with the date you first started purchasing continuous professional liability insurance and keeps providing you prior acts coverage.
This demonstrates the importance of making sure that you purchase the professional liability policy early (ideally when the company is founded) and that you are continuously renewing your policies on time so that you don’t get caught with a coverage gap or deletion of prior acts coverage.
Many insurers will also add-in an extended reporting period to their professional liability insurance. The extended reporting period will respond to claims filed within a certain time after your policy expires. This will typically be a 30-60 day period, but it’s possible to extend it by paying a higher premium.
What’s Not Covered?
An important factor to take into consideration with professional liability coverage is that you will never be covered if the act is proven to have been an intentional one. If the act is proven an intentional one, this would be considered a criminal offense, and your professional liability policy would not cover it.
Therefore, if you committed intentionally illegal, dishonest, or malicious acts, you won’t be covered.
You will also not be covered if you knew about a claim before the policy incepted. This is another reason to continuously buy E&O insurance as you must report matters once you find out about them. There is also no hiding. If you know of a matter, buy insurance and then try to report it as a new claim, the discovery process will almost always uncover the knowledge date.
Here are a few more specific examples of incidents that are not covered by professional liability insurance:
- Personal Injury or Property Damage
- These are usually covered by general liability insurance. For instance, if a client slips and falls in your office, professional liability won’t cover their medical expenses. Professional liability inusrance does not cover product-related injuries, either.
- Employee Injuries or Illnesses
- Workplace injuries are typically covered by workers’ compensation insurance, not professional liability. If an employee is injured while working, professional liability insurance won’t apply.
- Cyber Attacks and Data Breaches
- While some technology errors and omissions policies may offer limited cyber coverage, comprehensive protection against cyber risks usually requires a separate cyber liability insurance policy.
- Employee Discrimination Accusations
- Costs for lawsuits resulting from harassment, discrimination, and wrongful termination claims are covered by EPLI (employment practices liability insurance) policies. If an employee accuses your company of firing them without cause, professional liability would not cover your business.
As well, you will not be covered outside of the duration of your policy if the E&O coverage is a claims-made policy.
Does Professional Liability Insurance Have A Deductible?
Like most coverages, professional liability insurance does have a deductible. A deductible represents a certain amount of money that a business will have to pay out of pocket before its coverage kicks in. Typically, the higher your deductible is, the lower your premium will be.
There are also a number of different deductible options to consider when securing your professional liability policy. Typically, you’ll have to pay a deductible each time you file for a claim. However, most insurers will also offer an aggregate deductible. With this option, you’ll have to pay a capped deductible once annually – and it will cover all your claims, regardless of how many you file.
Additionally, you can specify that you want a first dollar defense deductible option. It will make your deductible apply only to damages and not legal costs.
Keep in mind that these options will make your professional liability more expensive.
What Does Professional Liability Insurance Cost?
It’s impossible to exactly determine your professional liability insurance premium without going through a full quoting process. However, we can broadly discuss what business can expect to pay on average, and break down the business factors that will affect how much you’ll have to pay for this type of insurance.
The factors that play a role in determining the cost of your professional liability insurance, include:
Why Get It With Embroker?
Easy.
We’ve made it easier than ever before to complete the purchase and get coverage. How easy? We don’t even need to see equity ownership or financial statements from you.
Affordable.
As a digital company, Embroker passes the savings for unnecessary administration on to you—for the most competitive professional liability insurance price you’ll find anywhere.
Complete.
Protect your business with the broadest coverage in the industry. You can tailor your professional liability policy to your needs by choosing your own limit and deductible.
Human.
We provide you with expert support no matter your question: Reach us 24/7 via phone, email or live chat. You even get a personal account manager to look after you and your insurance needs.
Still In Doubt?
Get your Professional Liability insurance quote in less than 10 minutes
“Fantastic rates on Professional Liability insurance. Personal service, friendly, efficient, rapid!”
Reed Longyear Malnati & Ahrens
Don’t Just Take Our Word for It!
With a Net Promoter Score (NPS) of 71 Embroker ranks above the insurance industry average.
NPS Score 2024
