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What is Errors and Omissions Insurance?

What is Errors and Omissions Insurance?

Mistakes can happen. However, when a professional makes an error, forgets to do something, or provides bad advice, there’s a chance they could get sued for negligence. That’s why all service-related individuals should have a suitable errors and omissions insurance policy active to protect them in case of accidental errors or alleged negligence.

Errors and omissions insurance, or E&O for short, is liability insurance that is designed to protect professionals from any claims alleging financial loss due to a service they provided. This could include lawsuits that allege negligence, errors, omissions, libel, defamation, misconduct or failure to deliver upon promised services. Today, let’s learn more about it.

Who Needs Errors and Omissions Insurance?

Any professional who provides advice to their clients. This could include consulting services, real estate agents, financial advisors, accountants, engineers, architects, psychologists, lawyers, media services, and other service-related individuals.

What Does it Cover?

E&O insurance will cover any legal costs and damages related to a claim. This can include lawyer fees, administrative fees, court filing fees, and settlement costs, just to name a few. This type of insurance will not cover improper employment practices that result in a claim or any illegal or fraudulent activities. It’s also important to note that E&O insurance does not offer protection for property damage, employee lawsuits or injuries.

How Much Coverage Do I Need?

The amount of coverage you will need depends on the size of your company, gross revenues, the type of services you offer, and a number of other factors. Considering the typical negligence lawsuit can cost a business approximately $100,000 before legal fees, it’s important to carry enough insurance to protect your company from financial hardship. Because of the impact that a claim can have on a business, it is recommended that smaller-sized companies carry at least one million dollars of coverage and larger agencies carry at least five million dollars.

Is it Mandatory?

In some industries, yes, E&O insurance is required by law. For example, mortgage agents are required to hold E&O insurance in order to practice. Many other high-risk industries also require insurance in order to operate.

How Do You Get It?

Companies will apply for a policy that protects the business and employees from any mistakes that are made on the job. Individuals and contractors can also obtain their own policies.

How Do I File an Errors and Omissions Claim? 

The first thing you’ll want to do is to review your policy and see if you have a solid claim. When you file any claim, you should write down as many details about it as possible. Information that you need to provide includes your name (and business name, if you use a different one for work), current contact information, your policy number and type of coverage, a description of the claim and incident in question, and when you first learned of what happened. Ensure that you stay informed and up-to-date on critical details whenever talking to your insurance provider. Ask if this particular incident is covered and request a follow-up.

How is Errors and Omissions Insurance Different from Commercial General Liability?

Errors and omissions insurance is purely to protect a business when it has been accused of negligent services or behaviour that has led to losses. This kind of coverage is also known as professional liability or indemnity insurance. Commercial general liability, on the other hand, protects third parties from bodily harm or property damage that may occur due to said negligence. This kind of coverage focuses on personal negligence rather than professional negligence, such as a person tripping over a box in your store and injuring themselves.

How Do I Prevent Errors and Omissions Risks?

In some cases, clients will blame financial losses on a company for not providing services that they never offered in the first place. Have a clear contract with your client stating exactly what your business will do, what it won’t, and what the client themselves will be responsible and paying for. This can go a long way in mitigating insurance costs down the line. Document all communications for future reference to have a “paper trail” handy at all times, and manage expectations accordingly. Never make promises you can’t keep. You should also have quality control processes in place to safeguard your operations and maintain an established standard. This will keep those inevitable small mistakes from slipping through the cracks, and it’s a step you can take to protect your business from claims of negligence.


  • As soon as you learn about an incident at work, submit an error and omissions claim. The longer you wait, the more your coverage will be negatively affected.
  • Put aside some money to fund your deductibles.
  • Gather as much information as possible about the incident if you believe you’re going to be sued.
  • If you are sued, document any communications you have with the plaintiff and all that you have with your insurance provider.

Need a hand with your errors and omissions insurance? We’re happy to help in any way we can. Contact one of our brokers at Rowat Insurance today to learn more.

Rowat Insurance

Insuring Ontario and Quebec since 1955. Trust Rowat Insurance Brokers to look after your home, auto, business and life insurance needs. We always guarantee fast, friendly service and highly competitive premiums. As brokers, we are entirely independent from Insurers and Financial Institutions; we will work with you to analyze and advise on risk, and customize the coverage that is right for you.