Everything Businesses Need to Know About E&O Insurance

Owning a business can be tricky. Even with careful planning and risk management, some customers can still walk away dissatisfied with the services or advice you provided. A business can quickly find itself in hot water if a former client decides to file a claim against you for negligent acts or inadequate work. This is where Errors and Omissions insurance can be a lifesaver. 

What is E&O Insurance?

Errors and Omissions insurance (E&O) is a common type of professional liability insurance that protects companies from the effects of claims that can result in expensive court costs and settlements. It covers business owners, employees, and contractors working on behalf of the business. This kind of insurance is most popular with professional advice-giving or service-providing businesses, such as consultants, lawyers, architects, physicians, and financial advisers. 

Who Needs This Type of Insurance and Why? 

In addition to advisers and professionals in the financial industry, businesses such as nonprofits, contractors, medical professionals, and even wedding planners should consider E&O insurance. 

For example, in high-stakes industries such as investing, financial advisers are commonly sued when deals go bad and money is lost. Even if a case moves to court and the panel finds in favor of the adviser, there can still be high legal fees associated with the case. This is often the case whether or not the business is actually at fault for negligence or poor service.

What Can an E&O Policy Cover?

There are several factors that will determine the cost and extent of your E&O business insurance. This can include the type of business you own, the location, the number of employees, and any coverage limits that may apply. Additionally, there are different types of coverage, such as:

  • Negligence – this protects a business against actual or alleged errors and omissions during the transaction of a service or advice. 
  • Defense Costs – secures funds for legal defense in the event that a claim moves to court.
  • Copyright Infringement – covers the expenses of claims or damages involving copyright infringement.


It’s also important to note that E&O insurance plans come with plenty of exclusions that are designed to ensure the trustworthiness and validity of the businesses they represent. Some common exclusions include:

  • Fee disputes
  • Failure to maintain insurance
  • Fraudulent or criminal acts committed by a business owner or employee
  • Bodily injury
  • Property damage 
  • Illegal profits
  • Wrongful acts business owners were aware of before the policy inception date
  • Illegal discrimination
  • Pollution
  • Libel or slander
  • Violation of any securities act

Having this type of insurance can help your business avoid a serious financial blow in the case of an expensive claim. It’s important to find the right independent insurance company to make sure your business and its employees are properly covered. 

Every business has its own unique set of needs and expectations. To find the best errors & omissions insurance policy for you, look to American Tri-Star Insurance.