Errors and Omissions Coverage
Updated 03:27 PM EST, Mon November 2, 2020
What Is E&O Insurance Coverage?
Let’s say an accountant at your firm gives your client bad advice, and they suffer a large financial loss. As a result, they sue your accounting firm for negligence. E&O insurance helps cover your firm’s defense costs and any judgments or settlements that result.
What’s Included in Errors and Omissions Insurance Coverage?
No matter how hard you try to avoid them, mistakes can happen. When they do, your customers can sue your business for:
- Negligence
- Errors
- Omissions
- Misrepresentation
- Violation of good faith and fair dealing
- Inaccurate advice
- Personal injury claims, like libel and slander
- Mistakes made by temporary staff and contractors
If your business faces a lawsuit like these, your E&O insurance policy can help pay for:
Damages, including any judgments and settlements that result from the lawsuit.
Defense costs, which can include attorney fees and other court-related expenses.
Disciplinary proceedings called by a regulatory, licensing or other government agency.
Loss of earnings as a result of the time you spend at depositions and trials.
Subpoena assistance if you’re a witness in a lawsuit.
Another benefit of getting your E&O policy from an insurance company like The Hartford is that you’ll have coverage across the U.S. and Canada. So, you’re protected even if you do business across state lines or in Canada.
Who Needs Errors and Omissions Insurance Coverage?
Some states and licensing boards require certain businesses to have E&O coverage. But even if it’s not required, you should consider including E&O coverage in your risk management plan if you work with customers.
Some businesses that can benefit from this insurance include:
Technology professionals, because tech failures can be devastating to your client’s finances. Software, hardware and electronic manufacturing businesses are at a high risk for errors and omissions lawsuits.
Management and business consultants who provide advice can get sued by unsatisfied clients.
Tax preparers, because mistakes or lapses in judgment can cost their clients money.
Accountants, because they give a wide range of financial advice, so their mistakes can have big financial impacts.
Advertising agencies since they can get sued if an ad or campaign results in a financial loss for their client.
Graphic designers who create ads, brochures, magazines, corporate reports and more for their clients with mistakes that can be expensive.
Interior decorators, because clients who are unhappy with their advice and decorating services can file lawsuits.
Travel agents, since a mistake can ruin a client’s vacation plans and lead to a lawsuit.
Having errors and omissions insurance sends a strong message to your clients that your business is reputable and trustworthy. It also shows that you’ve seriously thought about the risk of mistakes.
What Is NOT Included in Errors and Omissions Insurance Coverage
Employment practices, such as wrongful termination or harassment. You’ll need employment practices liability insurance to help cover these claims.
Illegal acts or purposeful wrongdoing, including dishonest behavior or fraudulent actions.
Patents and trade secrets taken without permission. Your general liability insurance policy may protect you if you're sued for stealing intellectual property.
Bodily injury or property damage caused by your business. If your customer falls and gets hurt in your office, or your employee damages your client’s property, you’d need general liability insurance.
Work-related injuries or illnesses to your employees are covered by workers' compensation insurance.
Personally identifiable information that’s lost or stolen. Data breach insurance can help cover your costs to notify people and restore your reputation.