Protect yourself from mistakes
Professional Liability also known as Errors and Omissions (E&O Insurance), professional liability or E&O insurance is protection for your business from claims of negligence related to a professional service.
There are many types of business insurance. Small business owners need to know which type or types of liability insurance they need to protect themselves from financial loss. There are two types of liability coverage for small businesses: general liability and professional liability, also known as Errors & Omissions (E & O) insurance.
There are many different types of risk and the liability insurance you carry should cover the ones that are most applicable to your business. Businesses selling products have different insurance needs than those providing professional services.
What Does General Liability Insurance Cover?
General liability (GL) insurance covers losses arising from claims by a third party. For example, while visiting your office or store, a client slips on wet tile and breaks their arm. Without general liability insurance, you will be responsible for all medical and legal bills arising from the accident.
General liability insurance provides coverage only for claims against you for damages to property or bodily injuries. It does not protect your losses from theft, fire, etc. For those types of losses, you should carry commercial property insurance.
GL does not cover mistakes or neglect, either. Those types of losses are covered by E & O insurance.
What Does E & O Insurance Cover?
E & O coverage protects a business owner from losses arising from professional mistakes or neglect. This includes actual or alleged negligence, defense costs, and claims arising from work performed (errors) in the past.
If you provide professional services or give clients advice, you should consider E & O insurance. Often, E & O insurance is required by clients prior to entering into a contract with you for services. Attorneys, consultants, architects, counselors, accountants, engineers, and real estate agents are professions that generally purchase professional liability insurance.
As you might imagine, the errors and omission insurance cost is far less than the potential damages incurred from an angry client's lawsuit.
Types of coverage
Professional liability insurance offers a variety of coverage for small businesses including:
Alleged or actual negligence - Protects a business against actual or alleged errors and omissions when providing professional services, such as giving incorrect advice, an omission, or failing to deliver a service.
Defense costs - Provides legal defense when a covered claim is reported.
Professional liability insurance can also offer coverage for claims arising from services provided in the past and work performed anywhere in the world.
It's important to understand that a general liability policy won’t protect against these risks. Get more information on how professional differs from general liability.
Who needs professional liability insurance?
Small businesses that provide professional services or give advice to clients should consider purchasing professional liability insurance. It provides protection when a business owner is sued for negligence because their work doesn't meet a client's expectations.
Professional liability insurance can also be required by a small business' clients when entering into a contract.
Businesses that often choose professional liability insurance include:
Real estate agents
And many more
Common questions about professional liability insurance?
Is errors and omissions insurance the same as professional liability?
Yes, there’s no difference between errors and omissions insurance (E&O insurance) and professional liability insurance; the two terms are often used interchangeably.
Will professional liability cover me even if the lawsuit is baseless?
Yes. Regardless of whether a claim against you is determined to be frivolous or not, your professional liability coverage would defend against a lawsuit claiming your professional neglect.
What’s the difference between professional liability and general liability coverages?
General liability coverage only protects against “third-party” damages for which you’re responsible (i.e. bodily injury to others or damage to their property ). Professional liability protects you from claims of neglect or professional errors.
Can I add professional liability to my BOP policy?
Depends. There are a lot of factors when determining if professional liability can be added as an endorsement to your business owners policy, you can call one of our knowledgeable agents to help you through the process.