Suppose you’ve ever shopped for business insurance as a professional before. In that case, you may have come across the term “E&O”. E&O, short for errors and omissions, outlines the kind of mistakes or misinformation that someone in a professional line of business could be accused of. E&O can be a big deal, sometimes resulting in tremendously costly lawsuits that can put you out of work for good.
E&O has always been a risk for professionals, but the new wave of AI has caused a surge of AI-related lawsuits over privacy infringement and copyright. Professional liability insurance, also called errors and omissions (E&O) insurance, is more important than ever to protect business professionals.
What is E&O insurance?
Errors and omissions insurance and professional liability insurance are the same thing, to summarize the topic shortly. However, businesses and insurers may use different names for similar/the same coverage, so it’s important to recognize that they refer to virtually the same policy. Whatever you call it, this type of insurance protects against claims of negligence, mistakes, or failure to perform duties that result in a financial loss to a client. Although it’s often referred to as E&O insurance, particularly in industries like real estate, insurance, and consulting, the term “professional liability insurance” is also widely used, especially in fields like law, medicine, and engineering.
E&O insurance is designed to cover the legal costs and any settlements or judgments that arise from claims of professional negligence. For example, if a financial advisor gives advice that leads to a client’s financial loss, the client might file a lawsuit claiming that the advisor’s guidance was flawed or incomplete. In such cases, E&O insurance would cover the costs of defending against the claim, as well as any damages awarded, up to the policy limits.
Why is E&O insurance also called professional liability insurance?
Errors and Omissions (E&O) insurance and professional liability insurance are terms often used interchangeably, but they essentially refer to the same type of coverage. The reason for the different names lies in the specific industries and professional practices where this insurance is most commonly utilized.
E&O insurance is a term frequently used in industries like real estate, consulting, and insurance. It emphasizes coverage for errors and omissions—essentially, mistakes or failures to perform certain duties—that could lead to a client’s financial loss. For example, if an insurance agent incorrectly processes a policy that results in a client being underinsured, the client could file a claim against the agent. E&O insurance would then cover the defense costs and any resulting financial liabilities.
On the other hand, professional liability insurance is a broader term that is commonly associated with professions such as law, medicine, and engineering. This term highlights the protection provided against claims of professional negligence or malpractice. For instance, a lawyer might be sued for providing poor legal advice that leads to a client’s loss in court. In this scenario, professional liability insurance would cover the associated legal expenses and any damages awarded.
Another name for E&O insurance includes medical malpractice insurance which, while it is technically also professional liability insurance, is more slanted towards medical professionals and the kinds of E&O claims that they may face.
The distinction in terminology often depends on the industry and the specific risks associated with it. However, medical malpractice, E&O and professional liability insurance serve the same fundamental purpose: to protect professionals from the financial consequences of claims alleging that their services or advice caused harm to a client. Whether referred to as E&O insurance, medical malpractice, or professional liability insurance, this coverage is a vital component of risk management for anyone offering professional services.
Who needs E&O insurance?
Any business or individual who offers a professional service or advice in exchange for monetary compensation could technically need or even be required to carry E&O insurance.
Here’s a list of some professionals who may benefit from or be required to carry E&O:
- Consultants
- Accountants
- Lawyers
- Therapists
- Social workers
- Nurses
- Chiropractors
- Physiotherapists
- Acupuncturists
- Advisors
- Architects
- Engineers
- Media and marketing professionals
- IT professionals
Note that this list is really finite, and your profession may fit the bill of a business that could benefit from–or even is required to carry–E&O/professional liability insurance.
Give us a call at AHI Group
Finding affordable coverage and understanding why it’s a need can be tough when you’re busy trying to build your business. That’s why insurance agencies like AutoHome Insurance Group exist!
If you’re a professional who is unsure of their insurance needs, has a policy but wants a better price, or wants to discuss the benefits of E&O insurance (or any of its variations), then you’ve come to the right place. At AHI, we help businesses that need affordable, comprehensive insurance protection. Give us a call to get started on insuring your professional business today.
