Errors and Omissions Insurance
Professional liability coverage protecting service providers against claims alleging negligent acts, errors, or omissions in the performance of professional services.
What It Is
Errors and Omissions (E&O) Insurance is a form of professional liability coverage that protects businesses and individuals who provide professional services or advice against claims of negligence, mistakes, or failure to perform. Unlike general liability (which covers bodily injury and property damage), E&O covers financial losses suffered by the claimant as a result of the insured's professional errors.
E&O is written on a claims-made basis, meaning the policy in effect when the claim is made (not when the error occurred) responds. Key policy features include the retroactive date (errors before this date are not covered), prior acts coverage, and an extended reporting period (tail) option.
Virtually every profession that provides advice, designs, or services needs E&O coverage — including insurance agents, real estate agents, architects, engineers, consultants, technology companies, accountants, and lawyers (where it's called legal malpractice insurance).
Why It Matters for Brokers
E&O is both a coverage brokers sell to clients and a coverage brokers need for themselves. Understanding E&O deeply is critical because: it's a claims-made product requiring careful management of retroactive dates and tail coverage at every renewal, the professional services definition varies dramatically between policies, and defense costs typically erode the limit. Brokers who don't properly manage their own E&O program face existential risk.
Real-World Example
An insurance broker fails to add a required additional insured endorsement to a client's CGL policy. The client's landlord suffers a $450K judgment in a liability suit and sues the broker for not securing the coverage that was contractually required. The broker's E&O policy provides defense counsel and covers the $450K settlement plus $120K in defense costs, subject to a $10K deductible per claim.
Common Mistakes
- 1Not verifying the retroactive date at every renewal — switching carriers without matching the retroactive date can create an uncovered gap for prior acts.
- 2Failing to report potential claims or circumstances that could give rise to claims during the current policy period, which may result in a coverage denial if the claim is reported under a subsequent policy.
- 3Assuming E&O covers all services the insured provides when the policy's definition of 'professional services' may be narrower than expected.
How brokerageaudit.com Handles This
Policy Checker extracts E&O policy terms including retroactive dates, professional services definitions, and sublimits for specific coverage extensions. Renewal Comparison highlights changes in retroactive dates, defense provisions, and coverage restrictions between policy periods to protect against inadvertent coverage gaps.