Who it’s for
- Consultants of all types: management, HR, operations, environmental and more
- Engineers and engineering firms
- Marketing and advertising agencies
- IT consultants and managed service providers
- Inspection companies of all kinds
- Professionals whose clients or contracts require proof of E&O
What it covers
Professional liability, or errors and omissions (E&O), covers claims that something you did, or didn’t do, in your professional work caused a client a financial loss. Examples:
- A consultant’s recommendation leads a client to make a costly decision.
- A designer’s drawings contain an error that costs the client money to fix.
- An inspector misses a problem that a buyer later discovers.
- An agency misses a deadline and the client loses a contract.
A typical policy pays for:
- Defence costs: lawyers, experts and legal expenses, which are often the largest part of a claim.
- Settlements and judgments for covered claims, up to your limit.
Most E&O policies are written on a claims-made basis. The policy in force when the claim is made and reported is the one that responds, not the policy in force when you did the work. Many policies also have a retroactive date, meaning work done before that date isn’t covered. Keeping continuous coverage, with the same retroactive date, protects your past work. That’s why moving your E&O from one insurer to another should be done carefully, with the retroactive date carried over in writing.
What it doesn’t cover, and common gaps
- Bodily injury and property damage. Those belong to your general liability policy.
- Dishonest or intentional acts.
- Promises and warranties you give in contracts. If your contract promises more than the law would normally expect of you, for example a specific result or a fixed outcome, the policy may not follow you there.
- Work outside your stated profession. If the policy describes you as a consultant and you also do design or installation, those activities may not be covered unless they’re disclosed.
- Known issues. A complaint you knew about before buying the policy usually isn’t covered.
- Defence costs inside the limit. On many policies, legal costs reduce the limit available for a settlement. Check whether yours does.
- Lapses. Letting coverage lapse, even briefly, can lose your retroactive date and leave years of past work uninsured.
Where your business and family policies overlap
E&O feels like a pure business policy, but it connects to your personal life more than most people expect.
- Sole proprietors and partners. If you operate without a corporation, a professional claim is a claim against you personally, and your home, cottage and investments are within reach. Even with a corporation, a client may name you personally.
- Your umbrella won’t help. A personal umbrella policy generally excludes professional services. Many owners assume their umbrella sits over everything; for E&O, it usually doesn’t.
- A spouse who helps with the business. If your spouse does bookkeeping, scheduling or client work, they should be considered in how the policy defines who’s insured.
- Retirement and run-off. When you retire, the claims about your past work don’t retire with you. Planning run-off coverage protects the personal assets you’ve built up.
- Side work. Professionals often do some advisory work outside their main business, or serve on a board. Each of those may need its own coverage.
Steve looks at how your business is structured, what you do outside the main business, and what personal assets are exposed, then checks whether your E&O, umbrella and D&O fit together.
How Steve works on this
E&O wordings vary a lot by profession and by insurer, and the details decide claims. Steve goes through the application with you so your services are described accurately, explains claims-made timing and retroactive dates in plain terms, and points out where the policy falls short. He’ll give you options and his own opinion on limits and wording. He reviews the insurance clauses in your key contracts, and calls at renewal to check for new services, new contracts or plans to retire.
If you’d like a second set of eyes on your E&O policy, book a review.
Common questions
What's the difference between professional liability and general liability?
General liability covers bodily injury and physical property damage. Professional liability covers financial loss caused by your advice or services, for example a client who says your recommendation, design or missed deadline cost them money. They cover different risks and many businesses need both.
What does claims-made mean?
Most E&O policies are claims-made, which means the policy in force when the claim is made, and reported, is the one that responds, not the policy in force when you did the work. A gap in coverage, or a careless switch between insurers, can leave past work uninsured.
What happens to my coverage if I retire or close my business?
Because E&O is claims-made, a claim about work you did years ago could arrive after your policy ends. An extended reporting period, sometimes called run-off or tail coverage, can give you time to report those claims. It needs to be arranged before the policy ends.
My client contract requires E&O. What should I check?
Look at the limit required, whether they want to be named on the policy, how long you have to keep the coverage after the job ends, and whether the contract has you accept liability you otherwise wouldn't have. Steve can review the insurance clauses with you before you sign.
Does E&O cover a claim with no merit?
The policy is designed to defend you against covered claims whether or not they have merit, subject to its terms. Defence costs are often a big part of an E&O claim, so it's worth checking whether they reduce your limit.