Errors and Omissions (E&O) insurance helps protect individuals and organizations that provide professional services from the financial impact of claims, including the costs of defending against them. Even the most careful professionals can face allegations from clients who believe a mistake, oversight, or failure to act caused them financial harm. As lawsuits and contractual requirements become more common across many industries, E&O insurance has become an essential part of managing professional risk.
Read this article to find out what E&O insurance is all about, the different types available, what it typically covers and excludes, and who may need it.
What is errors and omissions (E&O) insurance?
Errors and Omissions (E&O) insurance is a type of liability insurance for individuals and organizations that provide professional services. Liability insurance helps cover losses that an insured party incurs when they are legally responsible for causing harm to someone else. In the case of E&O insurance, it helps protect professionals from the financial impact of claims alleging errors, omissions, or negligence in the performance of professional services that resulted in financial harm to others. By covering legal defense costs and potential settlements, E&O insurance helps professionals protect their businesses, reputations, and financial stability.
For example,
A real estate agent fails to disclose a known zoning restriction on a commercial property. After completing the sale, the buyer discovers the restriction prevents the intended use of the property, resulting in $500,000 in lost income and redevelopment costs. The buyer sues the agent alleging professional negligence.
The damage to the third party, the buyer, was the financial loss resulting from the agent’s error in providing professional services. The real estate agent’s E&O policy may help cover the costs of legal defense and any settlement or judgment, subject to the policy’s terms, conditions, and exclusions. NOTE: E&O policies respond to allegations, not findings of guilt.
Other common names for this insurance include: professional liability insurance (primarily in North America) and professional indemnity insurance in other juridictions such as the UK, Australia, and New Zealand).
What does E&O insurance cover?
Errors and omissions insurance covers a professional or a professional firm in the event that a client alleges they were negligent in providing their service or sues them over that purported negligence. Negligence, in this context, is meant to cover a broad range of mistakes, slip-ups, and oversights that could happen while providing a service.
This can include any of the following:
Poor guidance or misleading advice — Example: A lawyer provides a client with advice that is based on an outdated statute. Following the lawyer’s guidance, the client inadvertently breaches the latest version of the statute, resulting in a costly fine.
Mistakes and oversights — Example: An accountant forgets to claim a substantial deductible on a client’s commercial taxes, resulting in a higher amount owing.
Negligent performance of professional services — Example: An advertising firm is hired by a fashion company to develop a summer campaign, but negligently manages the project and produces work that does not meet industry standards, causing the client to incur costs to redo the campaign.
Loss of sensitive information — Example: A marketing consultancy mishandles confidential client data in the course of providing marketing strategy and campaign management services, resulting in unauthorized disclosure.
Failure to exercise due professional care — Example: A graphic designer creates an ad campaign for a client featuring an image that is later discovered to be copyrighted. The client then has to take down and revamp the ads in the campaign to considerable expense.
What does an E&O policy not cover?
While E&O insurance can cover a wide variety of claims, there are some important limits to the coverage.
Here are some of the things E&O insurance won’t cover.
Pure breach of contract — Claims based solely on a failure to meet contractual terms such as missed deadlines, unmet deliverables, or failure to perform as promised are generally excluded, unless the claim also alleges negligence in the performance of professional services that would exist independent of the contract.
Losses intended to be covered under other policies — E&O insurance is intended to address professional negligence resulting in financial loss. Claims that primarily involve exposures better addressed under other types of insurance such as cyber liability, directors and officers (D&O) liability, employment practices liability (EPL), or commercial general liability (CGL) may be excluded or limited under an E&O policy. In those cases, coverage would typically be triggered under the more appropriate policy, if in place.
Intentional, dishonest, or illegal acts — Losses arising from criminal activity, fraud, or intentional violations of the law are excluded from coverage. E&O insurance does not protect professionals against liability resulting from unlawful conduct.
Prior acts or known circumstances— Claims arising from acts, errors, or omissions that occurred before the policy’s retroactive date or from circumstances the insured knew about before the policy began are typically excluded.
Fines, penalties and fee disputes — Regulatory fines, statutory penalties, punitive damages, and disputes over professional fees or demands for fee reimbursement, which are commonly excluded or limited.
Who needs E&O insurance?
Professionals buy E&O insurance because their work creates downstream financial risk. Clients rely on advice, analysis, and specialized judgment. When something goes wrong, the resulting losses can be significant. E&O insurance exists to address that reality.
Most purchase decisions fall into three main categories:
Regulatory Requirements
Certain professions must carry E&O insurance to meet regulatory or licensing obligations. Regulators recognize that professional errors can cause serious financial harm. They expect licensed professionals to demonstrate financial responsibility.
This requirement is common in accounting, financial services, consulting, and other regulated advisory roles (such as insurance brokers!). If your work requires certification, advanced training, or professional oversight, E&O insurance may be mandatory. Without it, you may be unable to maintain your license or continue operating.
Contractual Requirements
Many organizations require E&O insurance as a condition of doing business. These requirements appear frequently in service agreements, vendor contracts, and government tenders.
Clients impose these conditions because they rely on professional expertise. They want assurance that your business can respond if an error, omission, or negligent act causes financial loss. Without E&O insurance, you may be excluded from contracts, regardless of your experience or track record.
Risk Transfer Strategy
Professionals also buy E&O insurance as part of a broader risk transfer strategy. Many assume other liability policies will respond to professional mistakes. In most cases, they will not.
General liability and property policies typically exclude professional services. When a loss stems from advice, judgment, or failure to perform professional duties, those policies do not respond. E&O insurance fills that gap and completes the coverage structure.
Consider a property manager responsible for maintaining a commercial building. If the manager fails to address known plumbing issues, a pipe may burst and cause extensive water damage. The building’s property policy responds to the physical damage. However, it does not address the financial loss caused by the manager’s negligence.
After paying the claim, the building’s insurer may subrogate against the property manager to recover its loss. The building owner may also pursue the property manager for uncovered costs such as lost rental income or additional expenses. These claims do not arise from property ownership. They arise from professional negligence. The property manager’s E&O policy responds to those financial losses.
E&O insurance allows professionals to transfer liability that other policies intentionally exclude. When combined with property and general liability coverage and other policies, it forms a comprehensive risk management strategy rather than a standalone solution.
Different kinds of E&O insurance
Just as there are many different professions, there are also many types of E&O insurance policies. Risks and exposures vary significantly by profession. For example, medical doctors face risks related to misdiagnosis, treatment errors, or patient injury, while legal professionals face risks such as missed deadlines, incorrect legal advice, or conflicts of interest. For this reason there is no single “one-size-fits-all” E&O policy.
Professionals need E&O insurance coverage that addresses the specific risks of their profession as purchasing the wrong type of policy can leave critical gaps in protection. To this end, insurance companies have developed specialized E&O policies for a range of profession services.
Common Types of E&O Insurance:
Medical Malpractice (a form of E&O)
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- Specifically for healthcare professionals, doctors, dentists etc.
- Covers errors in diagnosis, treatment, or professional judgment
- Often regulated separately and highly specialized
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Lawyers Professional Liability / Legal Malpractice E&O
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- For attorneys and law firms
- Covers negligence, missed deadlines, or errors in legal advice
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Design-build insurance / Architects & Engineers (A&E) E&O
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- Covers design flaws, calculation errors, or project oversight
- Often required by contracts for construction projects
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Real Estate Professional Liability / Real Estate E&O
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- Covers real estate agents, brokers, and property managers
- Protects against claims like:
- Failure to disclose information
- Contract errors
- Misrepresentation of property details
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Financial Services E&O
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- Designed for professionals who provide financial advice or arrange financial products.
- Includes insurance brokers, life insurance agents, mortgage brokers, financial advisors, financial planners, and retirement advisers.
- Covers errors such as unsuitable advice, disclosure failures, and administrative or documentation mistakes.
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- Designed for providers of technology and IT-related services
- Covers:
- Software errors or failures
- Data handling mistakes
- System outages caused by professional services
- Used by IT consultants, SaaS companies, software developers
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Miscellaneous Professional Liability Insurance / General E&O
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- Not specific to any one profession
- Covers advice, services, and professional decisions
- The policy is structured to let the insurer adapt coverage to the unique risks of different professions. This flexibility allows it to fit a wide variety of professional services.
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Even professionals you might not immediately label as “professional services” can face E&O exposure when they provide advice, instruction, or specialized guidance. This can include fitness trainers, dieticians, tutors, educators, coaches, mediators, event planners, translators, grant writers, marketing consultants, instructional designers, course creators, and independent contractors who deliver expertise to clients.
Coordinating Insurance
Professional liability exposures rarely exist in isolation. An effective insurance program must coordinate E&O insurance with other policies rather than treating it as optional or standalone coverage.
Many losses involve multiple coverage triggers. A realtor who steals funds from a client trust account creates a crime loss. A property manager who fails to act on known maintenance issues may cause a property loss. A professional who mishandles client data may trigger a cyber incident. In each case, the underlying issue is not accidental damage or theft alone. It is a failure to properly perform professional duties.
E&O insurance often responds first to the professional negligence component of these losses. Crime, property, cyber, and general liability policies typically contain exclusions for professional services. Without E&O coverage, the insured may face a coverage gap even though other policies are in place.
For brokers, the key issue is coordination. The goal is not to replace other policies with E&O insurance. The goal is to ensure professional exposures are addressed where other forms intentionally stop. When E&O is aligned with crime, property, cyber, and general liability coverage, the result is a comprehensive risk transfer strategy rather than fragmented protection.
This coordination is essential to avoid uncovered claims, coverage disputes, and surprises at the time of loss.
Key Takeaways
- E&O insurance protects professionals from claims alleging errors, omissions, or negligence in their services.
- Coverage focuses on financial losses and may include legal defense costs and settlements.
- E&O policies respond to allegations, not findings of guilt.
- Not all mistakes are covered—intentional acts, fraud, and bodily injury are excluded.
- Individuals or companies that primarily give advice or provide a skilled service are likely to benefit from E&O insurance.
- E&O insurance must be tailored to each profession to avoid gaps in coverage.
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