Errors & Omissions Insurance Explained

By: Ben Cavallo, CIC, AAI, CISR

Together with partner Keith Signoriello, Ben Cavallo is the principal and co-owner of C&S Insurance.

In professional settings, it’s not a matter of if mistakes will happen, it’s a question of when they’ll occur. And if you aren’t covered by the right kind of insurance policy, those mistakes can be costly. If the nature of your work involves providing services to clients, having errors and omissions (E&O) coverage is a must when it comes to being prepared to face the consequences of these mishaps.

Keep reading to learn all about E&O insurance, including what it is, who needs it, and how it can protect you and your business.

Understanding E&O Insurance

To get started, let’s address the number one question: What is E&O insurance coverage? This is a form of professional liability coverage that protects your business (whether you’re self-employed or the owner of a company) in the event that clients claim you performed inadequate work, gave bad advice, or were negligent on the job.

If you’re sued and don’t have E&O coverage, you can be held liable for any damages and legal fees that result. Depending on the nature of the lawsuit, these amounts may be significant enough to put your business at risk of closing, which is why it’s always in your best interest to take every measure possible to protect your livelihood.

Who Needs E&O Insurance Coverage?

A good rule to follow is that if your business provides a service for clients, you should (or may be required to) add E&O coverage to your business insurance policy. For example, financial advisors, real estate agents, lawyers, contractors, etc. should all have some form of E&O insurance. If you’re wondering about medical practices, healthcare providers are typically covered by similar medical malpractice policies.

As mentioned previously, regulating bodies within your industry may require you to have E&O coverage as a condition of affiliation. Always double-check with the appropriate sources to ensure that your business complies with any mandates.

What Does an E&O Insurance Policy Cover?

Every business is unique, which is why exact details and limits vary between each E&O insurance policies. However, there are certain protections that this type of insurance generally offers, including against claims of:

  • Professional negligence, which occurs when a hired professional fails to exercise “reasonable care” in their services.
  • Mistakes that result from on-the-job oversights.
  • Delays due to missed deadlines.
  • Breach of contract, or the violation of agreed-upon terms.

In addition to these protections, E&O insurance also helps with the financial obligations associated with facing a lawsuit. These can include:

  • Legal fees and court costs
  • Settlements and judgments
  • Damages

And when it comes to who your E&O insurance policy covers, protection typically extends to you (the business owner) as well as any salaried and hourly employees and subcontractors.

Why Carry E&O Insurance?

For a better idea of just how valuable E&O insurance is, take a look at the following examples of how this coverage can protect policyholders who work in a variety of industries.


A financial planner provides clients with advice that leads to a loss of money. Because they have an E&O policy in place, they are able to avoid bearing the brunt of the legal fees from the ensuing lawsuit.


A CPA’s error when doing taxes results in penalties and fines for their client. Thanks to their E&O coverage, the CPA won’t be solely responsible for paying the damages should the court rule against them.


A self-employed contractor exceeds the agreed-upon timeline to complete a home renovation project. When their client sues them over the delay, the contractor’s E&O policy helps cover the court costs and any other penalties.

Real Estate

A realtor lists a home for a client but fails to disclose its structural flaws to the buyer. If the buyer brings the agent to court over the omission, their E&O insurance will ensure that they aren’t fully responsible for their attorney fees and other associated costs.

Protecting Your Business With an E&O Policy

Mistakes can happen to anyone, which is why it’s important to ensure that your business is prepared to withstand the consequences when they occur. If you have questions about your E&O policy or are looking for coverage, please don’t hesitate to get in touch — our team of business insurance experts is here to help.