Professional Liability /
Errors & Ommissions (E&O)
What is Professional Liability Insurance?
Professional liability insurance, sometimes referred to as known as errors and omissions insurance (or E&O), is a business insurance that protects you in the event a client files a lawsuit over perceived mistakes or inadequate advice.
If you offer services for a fee, having professional liability insurance is essential. This coverage is particularly useful for professional services, such as lawyers, accountants, consultants, investment advisors, real estate agents, architects, medical experts, engineers, tech companies, and others.
What does professional liability cover?
Professional liability insurance swoops in to cover scenarios, such as the following, offering businesses defense against legal claims, whether they are well-founded or unwarranted:
Professional Negligence or Failure to Meet Standards: Imagine a software development company creating a custom app for a client. If the app fails to meet security standards, leading to a data breach and subsequent legal action by users, the client could sue the development company for professional negligence.
Failure to Deliver a Promised Service on Time: Picture an event planning company hired to organize a corporate conference. If the planning company misses key deadlines, causing disruptions to the event and financial losses for the client, a lawsuit for failing to deliver the promised service on time could ensue.
Breach of Contract: Consider an advertising agency contracted to launch a marketing campaign for a business. If the agency deviates from the agreed-upon strategy outlined in the contract, resulting in a decline in the client's sales, a breach of contract claim might be initiated.
Errors: In the realm of IT consulting, think of a cybersecurity expert advising a company on protective measures. If the advice leads to vulnerabilities that are exploited by hackers, resulting in financial losses for the client, a lawsuit for professional errors could be filed against the consultant.
General Professional Misconduct: Envision an educational consultant favoring one student in a college admissions guidance program. If this bias results in unfair advantages and disadvantages for students, a claim against the consultant for general professional misconduct might be pursued.
What is not covered by professional liability?
Professional liability insurance has extensive coverage, but certain things are excluded:
Intentional or criminal acts are not covered.
Warranty or product guarantees your company makes are not covered.
Unhappiness with your work from a client is not a valid claim; coverage applies to errors or omissions.
Exclusions include illegal acts, defense costs for criminal prosecution, and employee injuries – for the latter, a workers’ compensation policy is needed.
General liability policies cover regular accidents unrelated to your expertise, like trips and falls.
Damages to your business property, such as computers and tools, require a separate policy like a business owners policy (BOP).
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