Glossary > Insurance > Business Insurance > Professional Liability Insurance (Errors & Omissions)

Errors And Omissions Insurance

Errors and Omissions Insurance (E&O), also known as Professional Liability Insurance, is a type of insurance that protects professionals from liability for negligent acts or errors and omissions committed while performing their professional duties. This coverage can help cover legal expenses, settlements, and judgments that may arise from such claims.

Example #1

For example, a graphic designer fails to meet a client's deadline for a project, resulting in financial losses for the client. The client could file a claim against the graphic designer for negligence, and E&O insurance would help cover the legal costs and any settlements.

Example #2

Another example could involve a real estate agent who unintentionally provides incorrect information about a property, leading to financial losses for the buyer. E&O insurance would step in to cover the costs of any resulting legal action.

Misuse

Misusing Errors and Omissions Insurance could involve attempting to claim for losses that are not a result of professional negligence. For instance, if a contractor deliberately cuts corners on a construction project leading to structural issues, trying to claim those damages under E&O insurance would be misuse. It is important to protect against misuse to ensure the integrity of the insurance system and prevent fraudulent claims.

Benefits

The benefit of Errors and Omissions Insurance is that it provides financial protection to professionals in case they make mistakes or overlook important details in their work. For example, a software developer releases a product with unintended bugs that cause financial losses for the client. E&O insurance would cover the costs of any resulting legal claims, allowing the developer to focus on rectifying the errors without bearing the full financial burden.

Conclusion

Errors and Omissions Insurance is crucial for professionals in various industries to safeguard themselves against potential liabilities arising from mistakes or oversights in their work. By offering financial protection and legal support, E&O insurance promotes accountability, fairness, and transparency in the marketplace, aligning with CAP's mission of empowering consumers and employees.