Errors and Omissions Insurance

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What is Errors and Omissions Insurance?

Errors and Omissions Insurance is a form of business insurance which protects companies and individuals from bearing the full cost of (defending against) a claim by a client who holds the firm responsible for an (advisory) service that was provided (or was failed to provide).

Errors and omissions insurance is an insurance contract quite similar to the Professional Liability Insurance, although the term E&O is typically used for advice-giving consultants, brokers and lawyers, real estate agents, accountants and insurance agents. For medical professionals, an E&O insurance is often called "Malpractice Insurance".

While general liability insurance is primarily focused on property damage or bodily injury. An errors and omissions insurance protects you if a client claims that your services caused them to suffer a financial loss.

Coverage of Errors and Omissions Insurance

• Most E&O policies cover judgments, settlements and defense costs. Even if allegations are ultimately found to be groundless, a large amount of money may be required for the lawsuit defense.
• E&O insurance does normally not cover intentional, fraudulent or illegal activities or in most policies, punitive damages.

Cost of Errors and Omissions Insurance. Premiums

E&O premiums are based on several factors:

• Type of products / services provided

• Country / state where services are provided

• Annual revenues

• Number of professionals / representatives providing services

• Loss/claims history

• Type of policy.

More and more countries are regulating errors and omissions insurance as mandatory for most professional categories.

As a result, insurance companies are stipulating and negotiating a contract with an entire category of professionals, with the advantages to negotiate large volumes for the company while offering better and tailored conditions and competitive prices for each associated professional.

It’s important to note that almost all Errors and Omissions insurance policies are sold on a “claims-made” basis. This means that the insurance only covers work performed while the policy is in force, and for claims actually filed during the term of the policy. If you cancel your E and O insurance policy without arranging for an extended reporting period, your coverage ends, and any claims submitted after the cancellation will not be covered, even though the work was performed while the policy was in effect.

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