Professional liability and Errors and Omissions ( E&O) are types of insurance policies that covers liability losses resulting from negligence or inaccurate advice from businesses or professionals in the course of their work.
An example of professional liability would be if a CPA preparing tax documents, makes a clerical error that costs their client thousands of dollars. The CPA can be sued for the additional cost and aggravation by the client.
An example of an error covered by an E&O policy would be a florist who fails to deliver flowers on time for a wedding. Something like this would not be covered on a general liability policy or BOP.
Who typically needs E&O or Professional Liability:
- CPA's and Accountants
- Law Firms
-Insurance Agents and Brokers
- Real Estate Brokers
- Real Estate Appraisers
- Marketing and PR firms
- Advertising Agencies
- Healthcare Professionals (called medical malpractice insurance)
- Cannabis Budtenders
- and many more...
The policy limit is the amount of coverage you are purchasing. E & O and Professional liability policies are typically purchased in increments of $1 million dollars. There are typically split limits as well. An example of this will be $1,000,000 per occurrence , $2 million per policy period.
A liability policy will typically have a retention amount. This is similar to a deductible on a property policy. It is the amount you would be responsible for when the claim is initiated.
The defense expenses in a liability policy will be described in the policy as inside or outside the policy limit. Inside the limit means that the costs to pay attorney fees will be taken from the policy limit. This could quickly erode you liability limit. When the defense costs are outside the limit, the insurance company will pay attorney fees in addition to the policy limit. In this case, the policy limit will be completely reserved to make a settlement or pay out to a claimant if necessary.