Who Needs Errors and Omissions Coverage?

March 2, 2019 •

To determine who might need it, Errors and Omissions (E&O) insurance should first be defined. Simply put, E&O specifically provides coverage for any errors or omissions made while rendering professional services. E&O protects you against clients’ claims of financial harm as a result of your company’s actions while performing your service.

You may think that your General Liability insurance fully covers you, but General Liability is only a safeguard against bodily injury or property damage-related claims. Keep reading to find out more about Errors and Omissions coverage: what is it and how does it work to benefit your business?


What Sort of Risks Does E&O Cover?

What does Errors and Omissions insurance cover and protect your business from? Clients and customers seeking expert advice will turn to your business’ professionals to offer that information. Having an Errors and Omissions policy protects you against claims that involve:

  • Errors
  • Negligence
  • Omission
  • Misrepresentation
  • Oversight
  • Good faith violations
  • Erroneous advice


Who Needs E&O?

So, who needs Errors and Omissions insurance? Certain industries are required by law or employer mandate to have E&O insurance. Such is the case for medical professionals, who take out a form of E&O referred to as malpractice insurance. Other well-known professionals that need E&O include attorneys, architects, and accountants.

E&O, however, isn’t restricted to those fields. If you provide professional services or advice, there’s E&O exposure. Mistakes made by tax preparers, travel agents, or even interior designers can incur pricey repercussions.

From financial planners to wedding planners, Errors and Omissions liability insurance is a necessity across a wide variety of occupations.

Take a look at a few scenarios in which E&O insurance coverage is beneficial:

  • If a shipment is accidentally sent to Mexico as opposed to New Mexico, the client’s sales could suffer, leaving the supplier to compensate for the client’s losses.
  • If a consultant is hired to rebrand a restaurant, but it fails to stay afloat, an aggrieved business owner may blame the brand consultant and file a lawsuit.
  • If a seller states that their home is 2,853 square feet, but the buyer later discovers that it’s 2,538 square feet, the buyer could sue the real estate agent for oversight. The agent could then be held liable for the difference in the property’s diminished value.
  • If a structural engineer inspects a building and gives an imprecise recommendation that results in damage, the contractor could choose to press charges for the faulty advice.

Ultimately, in an increasingly litigious society, no profession is immune from the risk of being slapped with a lawsuit. As a matter of fact, each year, 1 in 3 insurance agents face an Errors and Omissions liability dispute.


Why Do I Need E&O Insurance?

To be human is to be imperfect. And, in business, those imperfections can impact your performance. Even if you make no mistakes, you cannot control the actions of your employees or other unforeseen circumstances.

As with all customer service industries, there’s always the possibility that a customer may sue over a perceived problem. The claim that you are responsible for your client’s financial loss can be costly, time-consuming, and mentally taxing to resolve, whether it is legitimate or not. E&O will, however, cover you even if the case is found to be baseless.

While settlements may be a few thousand dollars, several cases assuredly add up. According to an empirical overview conducted by the National Center for State Courts, a typical E&O lawsuit can set you back $140,584. This sizeable sum is only what you would be handing over to your client. If you include the price tag of legal fees, up your total another five figures.

What Are the Benefits of E&O Insurance?
Without an Errors and Omissions policy, you can be left with a hefty bill for damages and legal fees. For small companies, these expenditures can quickly escalate from a minor thorn in your side to your financial downfall into bankruptcy. Even for larger companies, an E&O policy can prevent your resources from being drained. So, if you’re worried about what the average cost of Errors and Omissions Insurance is, remember it saves you the risk of paying more in the event of an attack.

That’s not the only benefit of purchasing E&O:

  • Financial protection – A point worth reiteration. Lawsuits can become steep endeavors. Administrative fees, defense costs, and courtroom reservations can cost thousands of dollars, especially if the case is drawn out. Additionally, you might need to pay for experts or eyewitnesses. Most importantly, E&O can prevent you from having to declare bankruptcy in order to finance large settlements or judgments.
  • Legal advice – In an already stressful situation, E&O can alleviate the burden of having to provide your own lawyer. Or, in some instances, it can prevent you from having to defend yourself, if you lack the funds to retain representation. Through your insurance policy, you can leave the responsibility of researching and hiring a suitable attorney to your insurer.
  • Peace of mind – E&O can imbue a sense of confidence on both sides—for the business and the customer. On your end, you can rest easier knowing that you are entitled to protection should a blunder occur. Clients can feel confident in their interactions with you, knowing that not only would they be compensated should the need arise, but that you have the foresight to anticipate potential mistakes.


When Should I Buy E&O Insurance?

The premise of insurance coverage is that you are taking preventative measures. You would not wait for a disaster to strike to establish a safety protocol. The same level of caution should be applied to your business to protect your professional and personal assets.

The takeaway here is to invest in an Errors and Omissions liability policy before you need it.


  1. Investopedia. Errors and Omissions Insurance (E&O). https://www.investopedia.com/terms/e/errors-omissions-insurance.asp
  2. Insurance Journal. Are Your Files Defensible’ A Look at E&O Risks for Agents and Brokers.
  3. Insurance Journal. The Ins and Outs of Errors and Omissions Insurance. https://www.insurancejournal.com/magazines/mag-features/2004/07/19/44745.htm
  4. National Center for State Courts. Caseload Highlights, Examining the Work of State Courts, Volume 11, Number 1: An Empirical Overview of Civil Trial Litigation.
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