When you provide services, advice, or expertise, there’s always a chance a client could claim your work caused them financial harm. That’s where Errors & Omissions (E&O) insurance, also known as professional liability insurance, comes in.

It’s designed to protect your business when clients allege mistakes, missed deadlines, or bad advice led to a loss. Below, we’ll break down what E&O covers, what it doesn’t, and real-world examples of how this protection works in practice.

What Errors & Omissions Insurance Covers

E&O insurance steps in when a client says your professional service, advice, or deliverable was wrong, late, or inadequate, and that mistake cost them money. Unlike General Liability (which covers physical injury or property damage), E&O is designed to cover financial losses caused by professional errors.

Here are the main areas of coverage:

Legal Defense Costs

If a client sues you over alleged negligence or mistakes, the policy may cover the cost of defending your company, including attorneys, court fees, and settlements.

This protection applies even if the claim turns out to be groundless. A strong E&O policy typically covers these legal fees in addition to your policy limit, so your defense costs don’t reduce the amount available to pay a settlement.

Settlements and Judgments

If a lawsuit ends in a settlement or court award, E&O insurance may pay those costs up to your policy limit.

This includes compensation for direct financial losses your client suffered because of your mistake, error, or failure to deliver.

Professional Errors and Negligence

E&O protects your business from a wide range of mistakes, from incorrect advice to oversights or failure to meet a professional standard of care.

Even if your intent was good and the issue was a simple miscommunication, your client can still claim negligence. Your policy may cover the cost to respond.

Missed Deadlines or Failure to Deliver

Projects don’t always go according to plan. If a client claims they lost money because your deliverable was delayed or didn’t meet contractual terms, E&O insurance may respond.

Financial Losses Caused by Your Work

Unlike General Liability Insurance, which covers bodily injury or property damage, E&O is built to cover losses when your work leads to lost revenue, penalties, or wasted spending for your client.

Claims Against Employees and Contractors

E&O insurance doesn’t just protect your company, it usually extends to employees, contractors, and temporary staff acting on your behalf.

What’s Not Covered by Errors & Omissions Insurance

While E&O is broad, it doesn’t cover every kind of risk. Knowing what’s excluded helps ensure your protection plan is complete. Common exclusions include:

• Bodily injury or property damage – Covered by General Liability, not E&O.
• Fraud or intentional wrongdoing – E&O only covers mistakes, not deliberate acts.
• Employee lawsuits – Covered by Employment Practices Liability Insurance (EPLI).
• Cyberattacks or data breaches – Covered by a Cyber policy.
• Intellectual property infringement – Usually excluded unless endorsed.
• Contractual guarantees – Claims based on unmet performance promises or “money-back guarantees” are not covered unless negligence is involved.

If your business faces these exposures, like storing sensitive data, employing staff, or marketing creative content, your broker can combine E&O with Cyber, EPLI, and General Liability coverage for full protection.

Learn more about the different types of business insurance.

Why Errors & Omissions Coverage Matters

One misunderstanding, coding error, or missed expectation can turn into a lawsuit that drains your resources and reputation. Even the most diligent teams make mistakes, and sometimes, clients simply blame your work for outcomes beyond your control. E&O insurance ensures that a single claim doesn’t threaten your business’s future. But the extent to which you're covered in each event depends on how high your coverage limits are, which is why it's important to know how much E&O Insurance you need.

Carrying E&O coverage isn’t just about compliance, it’s a sign of credibility. It shows clients and investors that you’re equipped to handle risk responsibly.

Frequently Asked Questions

Is E&O the same as professional liability insurance?

Yes. “Errors & Omissions” and “Professional Liability” are interchangeable terms.‍

Does E&O cover cyber or data breach incidents?

Sometimes, but it depends on the incident. For full coverage you should also have Cyber Insurance or a Tech E&O policy.‍

Does E&O cover product defects?

Only if the defect causes financial harm, not physical injury. Physical damage falls under product or general liability.‍

Does it cover independent contractors?

It may, if they’re acting on behalf of your company and included in the policy.‍

When does E&O coverage apply?

E&O policies are “claims-made,” meaning they cover claims filed while the policy is active, even for incidents that occurred earlier as long as coverage was continuous.

Vouch Specialty Insurance Services, LLC (CA License #6004944) is a licensed insurance producer in states where it conducts business. A complete list of state licenses is available at vouch.us/legal/licenses. Insurance products are underwritten by various insurance carriers, not by Vouch. This material is for informational purposes only and does not create a binding contract or alter policy terms. Coverage availability, terms, and conditions vary by state and are subject to underwriting review and approval.