In 2009, builders completed the Millennium Tower, a high-rise luxury residential building in San Francisco. In the years following, the tower began sinking and tilting. This caused a chain of investigations, claims, and blame.
The tower’s homeowners blamed the builder and design team, while the builder blamed the developer of a neighboring structure for destabilizing the tower. Many claims alleged that errors were made in the building’s design and foundation engineering.
Errors and omissions insurance protects your business if a client or customer claims you made an error in providing professional services. Who needs E&O and what does it cover?
In this guide, we’ll explore:
- What is errors and omissions insurance?
- What does E&O cover?
- Who needs E&O insurance?
- How much does E&O insurance cost?
- How to get E&O coverage
- The E&O claim process: What to expect
- Get the E&O coverage you need from a partner you trust
What is errors and omissions insurance?
Errors and omissions insurance, also known as professional liability insurance, is a type of coverage that provides financial protection if a client claims you made an error or omission in providing professional services.
What does E&O cover?
Errors and omissions coverage typically covers legal fees like defense costs, settlement costs, and judgments related to covered claims. It can cover claims related to errors in professional advice, failure to deliver promised services, claims of negligence, and other types of professional misconduct.
What is not covered by E&O?
E&O insurance is specific to professional services, and typically doesn’t cover:
- Bodily injury, property damage, and other claims addressed by general liability insurance
- Intentional misconduct or criminal activity
- Employee claims are typically covered by workers’ comp or EPLI
- Contractual disputes without allegations of professional negligence or errors
- Prior acts and known circumstances that occurred before policy inception
What is and isn’t covered can vary, so it’s important to be familiar with your specific policy details. At POWERS, we go through a thorough assessment with all clients to ensure the policies they buy fit the risk they face.
Errors and omissions vs. professional liability
E&O insurance and professional liability insurance typically refer to the same type of coverage and are used interchangeably. This type of coverage is also sometimes called professional indemnity insurance.
Errors and omissions vs. general liability
The difference between E&O and GL is one of scope. General liability insurance provides broad coverage for injury and property damage caused by your business, as well as claims of advertising injury and personal injury. In contrast, errors and omissions insurance coverage is specific to errors in providing professional services.
Errors and omissions vs. employers liability
These two types of coverage are very different. E&O covers errors made while providing services. On the other hand, employers liability insurance provides coverage for employee injury or illness claims that are not covered by workers’ compensation insurance.
Who needs E&O insurance?
We recommend an errors and omissions insurance policy for any business that offers professional services, especially those that provide advice or expertise to clients. This includes businesses in a wide range of industries, such as:
- Consultants and advisors
- Legal professionals
- Medical practitioners
- Architects, engineers, and design-build firms
- Real estate agents
- IT professionals like developers and tech service providers
- Financial advisors, accountants, and auditors
How much does E&O insurance cost?
The cost of E&O insurance depends on a number of factors, including:
- Profession and industry
- Business size
- Coverage limits and deductibles
- Claims history
Because insurance rates can vary, it’s important to work with a risk manager to find the best solution. Businesses with complex risk profiles will find the most value from partnering with an independent insurance agent that will help them proactively manage risk for long-term success.
How to get E&O coverage
An experienced agent should recommend insurance policies for you based on your business’s unique exposures and risk profile. If your agent hasn’t recommended E&O but you think it could be a good fit, ask about it.
Your agent will find the best options based on your risk assessment and present them to you. At POWERS, we cover the following questions when presenting clients with coverage options:
- Does the pricing match the client’s expectations?
- Does the policy have the appropriate limits, deductibles, and coverage enhancement endorsements?
- What are the carrier’s financial stability, reputation, and claims process like?
- What added value can the carrier offer the client – e.g. contract review and legal resources?
At POWERS, we work with some of the best business insurance carriers in the U.S. There’s no need to spend hours researching providers – we’ll make recommendations tailored to your business.
The E&O claim process: What to expect
If you need to file an E&O claim, don’t panic. Thousands of claims are filed every day.
The claim process is different for every carrier and agency, so we recommend learning your insurance agent’s process before you need to file a claim. That way, you’re prepared when the time comes.
Here’s the claim process for POWERS clients:
- Contact your POWERS account manager or claims handler before you call the insurance carrier.
- A POWERS expert will provide a claim consultation to help you evaluate the severity of the claim, your deductible level, contractor referrals, and what to expect going forward.
- With your approval, your account manager will submit the claim to the carrier on your behalf. In some cases, you might choose not to file a claim.
- We’ll pass along your claim number and your adjuster’s contact info.
- You’ll work directly with your adjuster to provide relevant evidence, like contracts, agreements, correspondence, and invoices.
- If your claim is covered, the carrier will offer a settlement amount to the claimant or provide a defense if a lawsuit is filed against you.
- The claim will be resolved through a settlement agreement or a court decision.
During this process, your POWERS claims consultant will be with you every step of the way.
Get the E&O coverage you need from a partner you trust
Many businesses can benefit from an errors and omissions policy, but how can you make sure you get the right coverage and the most value from your policy? Who will guide you through the claims process when an incident happens?
Any agent can write you a policy. But you don’t need any agent – you need a business partner with proven risk control expertise.
At POWERS, we spent more than 30 years developing what we call “the POWERS Process.” We use this five-step framework to get a deep understanding of your business and make recommendations that not only give you the right insurance coverage, but also help you make smart decisions to grow your business.
We know from decades of experience that a one-size-fits-all approach to risk management simply doesn’t work. We’ll take you through a series of discussion points to drill down and uncover exposures you’ve never considered. Then, we’ll build a plan to safeguard your business and look toward the future.
|Insurance as a stand-alone product||Insurance integrated into your customized risk management plan|
|Multiple, run-of-the-mill applications to assess your risk||Customized, proprietary assessment for a deep understanding of your risk|
|Focused on up-front cost savings||Focused on long-term cost control|
|Salespeople who write your policy and ghost you until renewal||Partners who help you make smart, growth-focused business decisions|
|Say they care about your business’s success||Show you we care by setting your risk management plan in motion|