Ultimate Guide to Errors and Omissions Insurance

Ultimate Guide to Errors and Omissions Insurance

What is errors and omissions insurance?

Also known as professional liability insurance, errors and omissions insurance provides protection if a client takes legal action against you as a result of or failure to provide your professional service or advice resulting in financial loss. Your coverage includes legal costs, awards, and settlements up to your policy limit. You must pay a deductible and not all scenarios are covered (intentional criminal acts, for example).

That’s a very “scraping the surface” definition. What errors and omissions insurance ultimately does is protect your business, whether the mistake you were accused of was actual or not, and assists in paying for legal expenses up until its policy limit. This coverage is, of course, subject to a deductible, but once that has been paid, your policy will cover all other costs pertaining to a lawsuit up until the policy limit. This means that all defence costs, administrative fees, settlements, and judgement awards may be covered by your policy – whether you win or lose your case.

Choosing the amount of errors and omissions insurance you would like is also critical to the wellbeing of your business. This is because every business sees a different level of risk, and every profession’s service may be valued at a different amount. Ultimately, your best option is to consult with an expert to determine what level of coverage is best for your business if you aren’t 100% certain. If you are underinsured, and a lawsuit sum is greater than what you’re covered for, the remaining costs would have to come out-of-pocket.


Why do I need errors and omissions insurance?

If you’re a professional who provides advice or a service, errors and omissions insurance is essential coverage. Architects, accountants, actuaries, consultants, contractors, designers, engineers, health professionals, lawyers, photographers, social services, and anyone else whose job is to provide consultation or professional services or advice should be protected by this type of liability coverage. You can be held liable for financial damages to your clients as a result of your professional advice or service, or your failure to provide it. Errors and omissions insurance or professional liability insurance can help cover your legal expenses including defence costs, awards, and settlements up to your policy limit. This protects your financial security and allows you to fight to save your reputation.


Do I need both general and professional liability insurance?

Yes. It’s a common misconception to assume that your errors and omissions insurance will also insure your business for any instances where your business inflicted bodily injury or property damage to a third-party (third-party being, in this case, a vendor, a guest, a passerby, or a client), but those types of claims are excluded. Commercial general liability insurance will not cover E&O claims but it will cover your business if it is sued because someone suffered bodily injury or property damage as a result of your business’ activities or at the premise of your business.

A robust risk management strategy covers all bases, and every professional business deals with clients on some level. As such, it is important not only for professionals to acquire errors and omissions insurance, but also ample general liability insurance to protect their baseline.


What is covered by errors and omissions insurance?

EasyCover’s errors and omissions insurance protects your financial security in a number of scenarios involving a client or third party’s financial loss as a result of your professional service or advice (or failure to provide it). This can include:

  • A negligent act, error, or omission
  • Misrepresentation
  • Libel and slander
  • Failure to deliver due to a third party
  • Intellectual property infringement
  • Breach of confidentiality
  • Delays
  • Failure to provide a service
  • Inaccurate advice
  • Loss of documents

Errors and omission insurance will help cover your legal expenses, including defence costs, settlements and awards up to your policy limit (which applies over the policy term of 12 months, not per covered claim). Also note that, per insured claim, you’ll be required to pay a deductible. Your deductible amount may range between $500 to upwards of $1,000, and you must pay this amount before the remaining expenses can be covered.


What is not covered by an E&O policy?

Not all scenarios are covered by your errors and omissions insurance, the same way that not everything is covered by a commercial general liability policy, or other form of business policy. An errors and omissions insurance policy will not cover criminal prosecution, nor will it cover civil liabilities that could arise in a civil court for instances not listed in your policy.

This may include criminal activity, illegal acts, intentional deeds of wrongdoing, and so on. Errors and omissions insurance will also not cover any general liability claims, such as bodily injury or property damage inflicted by your business. This is why it’s important to have both forms of liability insurance to cover your business.

To note as well, errors and omissions insurance will not cover temporary employees, claims in multiple jurisdictions, claims resulting from work that was completed before the policy was in force, etc. (*Note, however, that EasyCover offers a unique benefit: retroactive cover, which you can learn more about by conferring with one of our experts.) It also won’t cover cyber liability, claims made against directors and officers, or discrimination claims. All of these may, however, be covered by other forms of liability insurance.


What are the most common E&O claims?

Errors and omissions insurance is designed to cover claims of errors, omissions, and negligence. The majority of claims made are typically within the realm of those scenarios, but common scenarios may also include the following samples:

  • As a forensic scientist, you are preparing evidence but you accidentally use the wrong information when you send in your report. Unfortunately, you relaying this information causes financial loss to the party that hired you and they file a claim for negligence.


  • A company enlists you as a recruiter to hire an individual for a specific job. The individual does sub-par work, and the company sues you for your inadequate work in sufficiently background checking the individual.


  • You work as a marketing consultant and you’ve recently helped prepare an ad for a client. Unfortunately, another business alleges that the ad was based upon their own campaign and accuses your client of copyright infringement. Your client turns back around and sues your marketing company for the error.

In all of the above instances, having errors and omissions insurance could protect you. These scenarios could result in tens or even hundreds of thousands of dollars worth of losses, which could easily threaten the livelihood of your business. Your best bet is to get insured with EasyCover, find the right coverage for your business, and work with peace of mind knowing your risk management solutions are enough to keep your business alive and thriving for years to come.


How does errors and omissions insurance work?

Errors and omissions insurance protects you if a client or third party sues you for financial loss as a result of a provided or failure to provide professional service or advice. EasyCover errors and omissions insurance offers a unique benefit: an unlimited retroactive date. What does this mean? It means our insurance protects you for any new allegations or claims made against you for past work (so long as you only became aware of the grievance after purchasing your EasyCover policy and it’s reported).

There are a few important things to remember with errors and omissions insurance:

  • You must report any situation which may lead to legal action against you – failure to do so can result in a claim not being covered.
  • A policy limit applies and covers the entire policy term (12 months), not each individual claim.
  • You must pay a deductible for each covered claim (your deductible is determined by your business’ revenue).
  • Bodily injury and property damage claims fall under commercial general liability, which is separate insurance coverage (unless it was caused directly by a negligent act, error or omission as part of a professional service or advice)
  • Deliberate or dishonest acts aren’t covered.


How much does errors and omissions insurance cost?

The cost of an errors and omissions insurance policy varies depending on a number of factors. This variation is due to the fact that most insurance companies will gauge their prices based on your business’ risk appetite, which could be more or less depending on the kind of work you do, where you’re based, and more. Ultimately, the higher the risk you present, the likelier you are to see higher premiums. Most businesses will pay within the $500 to $1,000 mark per employee for errors and omissions insurance per year, but that’s just a rough range. True costs are based on:

  • The kind of business being covered
  • That business’ history, years of experience, etc.
  • That business’ insurance history, previous claims filed
  • Where that business is located
  • How much coverage that business has
  • That business’ employees
  • The value of that business’ service
  • The average cost of a lawsuit in that business’ industry
  • General and average gross revenue

Get a FREE errors and omissions insurance quote from EasyCover to see a closer guess at what your business may end up paying for its insurance. As we can offer an E&O quote in just minutes, it takes very little time to see how much (approximately) your business will end up paying.


How long is E&O insurance good for?

Most errors and omissions insurance policies will have a policy period of about 12 months. During this time, your errors and omissions insurance will cover you for any claims made up until your policy’s limit. EasyCover follows the industry standard and its policies are written as a Claims Made form, but we also offer a unique form of coverage known as unlimited retroactive date coverage. This means that your policy will also respond to new allegations or claims made against your business for any past work which was done prior to you purchasing your EasyCover policy. This only applies as long as you were aware of the grievance made against you during the policy term and the claim is reported to your provider during the policy term. The majority of policies will set the retroactive date to the policy inception date, which means you would not have coverage for work completed before the insurance policy’s inception date.


What do I need for an Errors and Omissions Insurance Quote?

Just yourself, information about your business, and access to Internet. You can apply for a quote wherever you are, so long as you know your business’ industry, location, and basic info about it, and you have two or so minutes to fill out a quick quoting field. Once you’ve done that, you’ll receive quotes. It’s a quick and easy process and EasyCover Canada prides itself as one of the only online portals in Canada that provides insurance directly to you without the need for a middleman (i.e., a broker.)


How can I find the most appropriate errors and omissions insurance for my profession?

Each industry or profession has different risks. EasyCover offers specialized policies that focus on the particular liability risks for a profession, including:

  • Consultants (for a variety of industries)
  • Contractors (for a variety of industries)
  • IT/Computer
  • Engineering
  • Health professionals
  • Managers
  • Construction
  • Social services
  • Finance professionals
  • Legal services
  • Photographers
  • Forensic experts
  • New media professionals

If your profession isn’t listed here, don’t worry! Give us a call and we’ll see what we can do.

There are also different levels of coverage for policy limits. For example, EasyCover provides three options:

  • $1 million
  • $2 million
  • $5 million

This is the limit of what can be paid out over the policy term (12 months), regardless of how many claims there are. You should choose the level of coverage that best reflects your risk of a lawsuit, the value of your work, and the potential cost of legal defence.


What is the difference between D&O and E&O insurance?

D&O insurance, otherwise known as directors and officers’ insurance, is comprehensive insurance coverage designed to supplement existing professional liability insurance/errors and omissions insurance. It is designed to protect corporate directors and officers, who are expected to make certain business decisions and act in the best interest of the companies that they serve. Unfortunately, because these decisions can result in the losses of stakeholders and shareholders, and often disgruntled parties can come back at them with lawsuits alleging their liability for wrongdoing, it’s important to have D&O insurance to protect your directors and officers’ personal liability. Especially for nonprofits, lawsuits are becoming increasingly severe and costly. D&O insurance secures your business or organization and supplements your errors and omissions insurance.

Errors and omissions insurance, on the other hand, may still be a necessary purchase for these organizations but it is wrong to assume that your errors and omissions will cover D&O losses and vice versa. Instead, these policies supplement each other to protect your personal assets. Errors and omissions insurance both cover your business or organization for legal fees, settlements, and other associated costs of a lawsuit, but for lawsuits of different claims. Both D&O and E&O claims resulting in lawsuits can tick into the hundreds of thousands of dollars, so it’s better to have the right insurance.


Things to Remember When Purchasing Errors and Omissions Insurance

Purchasing the cheapest insurance may not be in your best interests: you could find yourself inadequately covered in the event of a claim. Your policy should balance your coverage requirements and your budget. Lawsuits are expensive and even if the claims are unfounded, you’ll still need to pay for representation. Errors and omissions insurance can help protect you and your business and give you peace of mind.

You should also inquire if there is a retroactive date. While EasyCover offers an unlimited retroactive date (meaning your past work is protected and any new allegations or claims made against you will be covered, so long as there was no prior knowledge of them), many other insurers have limits.

Finally, ensure you understand your policy. Know what is and what isn’t covered as well as your duties when it comes to reporting potential legal claims against you.

You can always chat with one of our professional insurance brokers. They can help answer your questions and point you in the right direction.


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