Errors and Omissions (E&O)

Errors and omissions coverage, commonly called E&O or professional liability insurance, protects service businesses and professionals when a mistake, oversight, or failure to perform professional services causes a client to suffer a financial loss. It is the professional-services equivalent of malpractice coverage, the specific term used in medicine. Any business that gives advice, provides analysis, designs solutions, manages others’ finances or data, or represents clients in a professional capacity carries E&O exposure that general liability coverage does not address.

What does errors and omissions insurance cover?

E&O covers pure financial harm with no physical component. General liability covers bodily injury and property damage caused to third parties, but it pays nothing when a client suffers only a financial loss from a professional error. An accountant who files a return incorrectly and causes a client to face a large tax penalty has caused no physical injury and no property damage, only a financial loss from a professional error. E&O pays for the legal defense and the settlement or judgment. Professions that commonly carry E&O include financial advisors, architects, engineers, insurance agents, management consultants, IT professionals, attorneys, staffing agencies, and anyone whose professional error could cost a client money.

How is E&O different from general liability insurance?

Georgia businesses in professional services often underestimate this exposure because their general liability policy covers so much else. For example, a technology consultant whose deployed system fails and costs a client weeks of downtime has caused no physical injury, so general liability pays nothing. E&O pays the defense costs and any resulting judgment or settlement. As explained in our FAQ on what professional liability insurance covers, the two policies work side by side rather than overlapping.

What is claims-made coverage and why does it matter for E&O?

E&O policies are almost always written on a claims-made basis, meaning the policy must be active when the claim is reported, not just when the underlying error occurred. If a business closes or a professional retires, buying tail coverage to extend the reporting window after the policy ends is essential. Errors discovered years after the work was done are common. For example, a financial plan that underperformed for five years before the client realized the advice was flawed would generate a claim long after the original work was completed. The tail premium is typically one to two times the annual premium, paid once, for ongoing protection. See our FAQ on claims-made vs. occurrence coverage for a fuller explanation of how the two policy forms differ.

What should be reviewed at each E&O policy renewal?

Limits and deductibles vary considerably by profession, firm size, and the dollar value of work performed. Retroactive dates also matter on claims-made policies: if the retroactive date does not reach back far enough, work done before that date is excluded even if the claim is filed while the policy is active. Reviewing the retroactive date at each renewal is a basic risk-management step that often gets overlooked. A coverage review can identify whether current E&O limits match actual exposure and whether the retroactive date leaves any gaps, as described in our FAQ on what a coverage review involves.