Errors & Omissions Insurance
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Errors & Omissions Insurance Information
Definition of 'Errors and Omissions Insurance -E&O"
A professional liability insurance that protects companies and individuals against claims made by clients for inadequate work or negligent actions. Errors and omissions insurance often covers both court costs and any settlements up to the amount specified on the insurance contract.
In the financial industry, lawsuits will happen, regardless on how baseless the claims may be. Clients sometimes sue an advisor or broker after an investment goes sour, even if the risks were well known and within the guidelines established by the client. In these cases, even if a court or arbitration panel finds in favor of a broker or investment advisor, the legal fees can be very high and E&O insurance is vital in these situations. A person or company that has had numerous litigation problems has a higher underwriting risk and will find E&O insurance to be more expensive or less favorable in its terms as a result.
Professional liability insurance
(PLI), also called professional indemnity insurance
(PII) but more commonly known as errors & omissions
(E&O) in the US, is a form of liability insurance that helps protect professional advice- and service-providing individuals and companies from bearing the full cost of defending against a negligence claim made by a client, and damages awarded in such a civil lawsuit. The coverage focuses on alleged failure to perform on the part of, financial loss caused by, and error or omission in the service or product sold by the policyholder. These are potential causes for legal action that would not be covered by a more general liability insurance policy which addresses more direct forms of harm. Professional liability coverage sometimes also provides for the defense costs, including when legal action turns out to be groundless. Coverage does not include criminal prosecution, nor a wide range of potential liabilities under civil law that are not enumerated in the policy, but which may be subject to other forms of insurance. Professional liability insurance is required by law in some areas for certain kinds of professional practice (especially medical and legal), and is also sometimes required under contract by other businesses that are the beneficiaries of the advice or service.
Professional liability insurance may take on different forms and names depending on the profession. For example, in reference to medical professions it is called malpractice insurance
, while errors and omissions
is used by consultants, brokers and lawyers. Other professions that commonly purchase professional liability insurance include accounting and financial services, construction and maintenance (general contractors, plumbers, etc., many of whom are also surety bonded), and transport. Some charities and other nonprofits/NGOs are also professional-liability insured