Errors And Omissions Insurance

What Does Errors And Omissions Insurance Mean?

Errors and omissions (E&O) insurance is a type of liability insurance designed to protect businesses against losses arising from mistakes or negligence in their professional services. Such losses typically result from client lawsuits. E&O insurance generally covers both the primary financial losses and associated court costs. Many insurers also sell this coverage as professional liability insurance, which is the more common name when the policyholder is a consultant or other service-based business.

Insuranceopedia Explains Errors And Omissions Insurance

Even top-performing companies can sometimes make mistakes. For instance, a train manufacturer might inadvertently use a defective part in an engine, causing a train breakdown and resulting in financial losses for the client. The client could then file a lawsuit against the manufacturer. Errors and omissions (E&O) insurance would cover such losses, helping to mitigate the financial impact. This coverage does not replace general liability insurance, which covers claims for bodily injury or property damage caused by a business; many companies carry both types. E&O insurance is just one of many types of commercial insurance businesses can purchase to manage their risk exposures.