What is Errors and Omissions (E&O) Insurance?

How errors and omissions insurance is commonly described

Errors and Omissions Insurance is often used interchangeably with the term professional indemnity insurance, particularly in the UK. While terminology may vary by industry or insurer, both terms generally relate to cover associated with professional services and advice.

Policies are arranged on a claims-made basis and are subject to defined limits, exclusions and conditions. The scope of cover will depend on the nature of the services provided and how the policy is structured.

How errors and omissions insurance generally operates

Where a claim is made alleging negligence, error or omission in professional services, an E&O policy may respond by covering certain costs associated with defending the claim, subject to policy terms.

This may include legal defence costs and, where applicable, compensation or settlement amounts awarded following an insured claim. Coverage typically applies to claims first made during the policy period, regardless of when the alleged act or omission occurred, provided it falls within the policy’s scope and any retroactive date.

Types of services commonly associated with E&O insurance

Errors and omissions insurance is most often associated with businesses and professionals whose work involves providing specialist advice, consultancy or services that could give rise to financial loss if errors occur.

This may include, but is not limited to, consultancy services, financial or accounting services, legal services, design or engineering services, technology services, and other professional activities where clients rely on specialist expertise.

The relevance of E&O insurance will vary depending on the nature of the services provided and the contractual responsibilities involved.

What errors and omissions insurance is commonly intended to address

Policies described as errors and omissions insurance are typically associated with claims involving:

• Alleged professional negligence
• Errors or omissions in service delivery
• Failure to meet contractual obligations
• Legal defence costs connected with insured claims

Coverage does not generally extend to criminal acts, deliberate wrongdoing or fraudulent behaviour. The precise scope of cover will depend on the policy wording and insurer.

The difference between errors and omissions insurance and general liability insurance

Errors and omissions insurance and general liability insurance address different types of risk.

Errors and omissions insurance relates to claims arising from professional services, advice or consultancy work. General liability insurance, by contrast, typically relates to third-party claims for bodily injury or property damage arising from business activities.

Businesses may hold both types of insurance, depending on their operations and risk exposure, as each policy responds to different circumstances.

Regulatory and contractual considerations

Errors and omissions insurance is not universally required by law. However, some professions are subject to regulatory requirements or professional standards that require professional liability cover to be in place.

In addition, certain clients or contractual arrangements may require evidence of E&O or professional indemnity insurance as part of supplier or tender requirements. These requirements vary by industry and organisation.

Understanding insurance and professional risk

Providing professional services involves a degree of inherent risk, particularly where clients rely on advice or specialist input to make decisions. Insurance is one element of a broader approach to risk management and does not replace professional standards, governance or contractual controls.

How insurance interacts with professional risk will depend on the services provided, contractual terms and the structure of the policy.

Understanding how errors and omissions insurance relates to financial exposure

Errors and omissions insurance is a term used to describe how certain insurance policies may respond to claims arising from alleged professional errors or omissions. While it is not relevant to every business, it provides a framework for understanding how insured claims may affect financial exposure in specific circumstances.

This information is provided for general guidance only and does not constitute insurance advice. Insurance requirements vary depending on individual circumstances, policy terms and insurer conditions.

Frequently Asked Questions

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

Errors and omissions insurance and professional indemnity insurance are often used interchangeably. Both generally relate to cover for claims arising from alleged negligence, errors or omissions in professional services, although terminology may vary by insurer or industry.

Does errors and omissions insurance cover all professional claims?

No. Policies apply to defined services, limits and insured events. Certain claims, including criminal acts, deliberate wrongdoing or fraud, are typically excluded. Coverage depends on the policy wording.

Is errors and omissions insurance legally required?

Errors and omissions insurance is not universally required by law. However, some professions are subject to regulatory or professional body requirements, and some contracts may require evidence of cover.

Does errors and omissions insurance prevent claims from being made?

Insurance does not prevent claims from being made. Instead, certain policies are intended to respond to insured claims, which may influence how the financial impact of those claims is managed.

Is E&O insurance the same as an E&OE disclaimer?

No. An E&OE (Errors and Omissions Excepted) disclaimer is a contractual or documentary clause intended to limit liability for minor inaccuracies. Errors and omissions insurance is a formal insurance policy designed to respond to certain professional liability claims.