Errors and Omissions (Professional Liability Insurance)

What is errors and omissions insurance?

Errors and omissions insurance helps to protect you when a client holds you or your company responsible for a service you provided, or failed to provide, that did not have the expected or promised results.

For example: if you are an accountant that neglected to file a required form when filing your client’s business taxes, you could be sued for the financial loss incurred by your client after the CRA performs an audit.

BrokerLink can offer coverage to help defend you and keep your professional reputation from being harmed. To learn more, talk with one of our brokers.

Who needs errors and omissions insurance?

Errors and omissions insurance is for individuals who provide professional services or advice to their clients, including but not limited to, the following professions:

• Accountants
• Advertising and marketing agencies
• Barbershops and hair salons
• Consulting companies
• Doctors and other medical professionals
• Educators
• Engineers and engineering firms
• Information technology companies
• Insurance brokerages
• Law firms
• Non-profit organizations
• Pet services, such as veterinarians and groomers
• Printing and publishing companies
• Real estate firms and agents
• Travel agents
• Website developers

Talk with your insurance advisor to learn whether you can benefit from having E&O insurance coverage.

What does errors and omissions insurance cover?

In the unfortunate event that a mistake is made, an errors and omissions insurance policy offers peace of mind that you are covered, so that you can stay focused on your business. As a business owner, you can purchase blanket E&O coverage for an entire company. However, in some circumstances, it is worth encouraging part-time or contracted professional employees to obtain their own professional liability (E&O) insurance. Professionals, like some accountants or clinicians, are required to carry a subset of this liability to maintain their licensing or designation.

Below are some things often covered under an E&O insurance policy:

Negligence: the failure to act in a reasonable way when faced with a circumstance, leading to damage. Negligence is sometimes proven by an oversight committee or proven legally. The insurer will cover a client for negligence if said negligence is blatantly not a criminal code violation (insurance is under contract law; criminal law supersedes this and nullifies contracts). An example of negligence could be an architect making an error on a blueprint.

Errors in services given: a clerical error in a contract causing miscommunication and work delays.

Omissions: when something is left out or left unfinished. An example of an omission could be important information left out of a medical report by a specialist leading to an incorrect diagnosis.

Misrepresentation: a false or misleading statement. An example of misrepresentation could be allowing them to believe you’re an experienced or senior consultant, when you’ve only started practicing in your field.

Violation of good faith or fair dealing: failing to act honestly or contrast to the “spirit” of the contract.

The coverages listed above would only be covered if the acts are unintentional.

What coverages are excluded from an errors and omissions insurance policy?

There are some coverages that are typically excluded from an E&O insurance policy, or that may be covered under other policies.

Intentional or dishonest acts: these types of acts are often excluded from policies due to the intent to cause harm.

Bodily injury: your general liability policy typically covers the physical injury of a client on your property.

Property damage: damages to your property would be covered by your property business insurance.

Employee injuries: if the employee’s job-related injury is due to the negligence of an employer, employer liability coverage would step in.

Discrimination or harassment in the workplace: this usually falls under your employment practices liability coverage.

All insurance coverages and policies can be customized according to your profession and the needs of your business. Speak with a BrokerLink business insurance expert to understand which coverages are ideal for your profession.

Why is errors and omissions insurance important?

A lawsuit can result in costly legal fees, possibly placing your business and personal assets at risk. If your company is sued by a client, errors and omission insurance coverage can help pay for the following:

• Court fees
• Lawyer costs
• Settlement costs
• Court-ordered judgements

Legal fees can add up, but there is also a cost associated with lost time and productivity as a business owner, and any employees assisting with the lawsuit. E&O coverage can help to support your business through these unfortunate circumstances.

How can you protect against an errors and omissions claim?

Putting strong risk management practices into place can aid in minimizing claims within your organization.

When evaluating a potential client, collect and review as much information as possible; and ensure you have the resources needed to take on each client.

Have a thorough client intake form that asks for information like:

• Prior consultants used by the client
• How the client chose your firm
• Fee and billing arrangements
• Client goals and expectations

Have a detailed working agreement or contract, and consider including the following:

• Proper identification
• The full scope of work, include as much detail as possible
• Fee structure
• The responsibilities and expectations from both parties

Document! Document! Document! Your diligence in keeping meeting notes and correspondence, as well as filing all receipts and invoices, will come to your defence in case of a lawsuit.

Get in touch with an experienced insurance broker

We can accommodate any of your errors and omissions insurance needs. We’re proud of our connections to specialty insurers, allowing us to customize policies to ensure you have coverage in the areas relevant to you and your business.

To learn more about E&O insurance, contact a BrokerLink commercial insurance broker.

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Errors and omissions insurance FAQs

Is errors and omissions insurance the same as professional liability insurance?

Yes, the names can vary depending on the industry being insured, but they are one and the same.

What does errors and omissions insurance cost?

The cost of your errors and omissions insurance depends on many different factors including industry (i.e., lawyer, engineer, broker) and business volume (i.e., revenue, fees, commissions), as well as the limit of insurance and the deductible you’re willing to pay should a claim occur. It is best to discuss the details of your E&O coverage with your insurance advisor, to ensure you have the appropriate coverage for the services you offer.

What is the difference between professional liability insurance and general liability insurance?

General liability insurance helps protect your business from losses your company may experience should you be sued because of property damage, injuries or death caused by your services, business operations, or your employees. Professional liability (E&O insurance) coverage can be purchased as additional protection for settlements, defence costs, negligence, mistakes, and oversights against potential damages whether or not you’re found liable.

If you have any questions, contact one of our local branches.