Errors & Omissions Insurance: What It Covers & Who Needs It
A lawsuit doesn’t have to be justified to be expensive. For professionals whose business model relies on advice, expertise, or service, a single unhappy client or misinterpreted contract can quickly become a financial burden. Whether you’re a consultant advising tech startups or a government contractor navigating tight contracts, errors & omissions insurance can be the safety net you need to protect your reputation and bottom line when claims of negligence or mistakes arise. Yet many professionals still underestimate how exposed they really are.
What Does Errors & Omissions Insurance Cover?
Errors & omissions insurance helps cover the legal costs and potential settlements associated with claims that your service, advice, or oversight led to a financial loss. Also known as E&O or professional liability insurance, it typically encompasses:
- Negligence: Allegedly failing to meet professional standards or expectations
- Errors or omissions: Mistakes in documentation, advice, or execution of work
- Misstatements or misrepresentations: Inaccuracies in the information provided to clients
- Breach of contract: Claims that you didn’t uphold your end of a service agreement
Crucially, this coverage does not apply to criminal activity, intentional wrongdoing, or fraudulent behavior. But for everything from simple clerical errors to misjudged timelines, E&O offers a financial and legal safeguard.
Imagine a consultant provides market entry advice to a biotech startup that results in an unsuccessful product launch. Even if the guidance was well-intentioned and based on data, the company may allege the advice was negligent. Or consider a medical device distributor who misses a deadline for a regulatory filing. Both examples could spiral into legal action and steep costs without E&O in place.
Who Typically Carries Errors & Omissions Insurance?
While it’s easy to associate this coverage with financial advisors or legal professionals, the reality is much broader. Industries where service and expertise are the product are especially vulnerable to client disputes and miscommunication. These include:
- Technology and IT service providers
- Consultants and business advisors
- Medical technology and life sciences firms
- Financial and legal professionals
- Trade and professional associations
- Marketing and advertising firms
Even small businesses with minimal staff can be at risk. A freelance IT consultant who misinterprets a client’s expectations can face the same legal headaches as larger firms. Just because you haven’t had a claim doesn’t mean you’re not at risk.
When and Why Claims Happen
E&O claims don’t always come from egregious mistakes. More often, they’re the result of small oversights with significant consequences. A few common triggers include:
- Missed deadlines that delay a product launch or property transaction
- Incorrect guidance that results in financial losses for a client
- Communication breakdowns that cause confusion about deliverables or responsibilities
In many cases, these disputes arise even when the business acted responsibly. Defending against meritless allegations can still require expensive legal counsel and countless hours of lost time. Many service contracts now even require proof of E&O insurance as a condition for doing business. Without it, you could be left footing the bill and losing future opportunities.
Protecting Your Reputation and Your Business
If your business provides services, advice, or professional expertise, the chances are you need E&O insurance. The cost of coverage is far less than the potential financial damage of even one client claim.
Not sure where your vulnerabilities lie? The team at Moody Insurance Worldwide can help you assess your current exposure and provide a professional liability quote tailored to your industry. Whether you’re expanding your client base or tightening up contracts, Moody offers the insight and coverage options you need to move forward with confidence.
About Moody Insurance Worldwide
We are a specialized, independent insurance agency that provides all types of business insurance for the life sciences and medical technology industries. In addition to essential Property, Liability, and Benefits insurance, we have expertise in Professional Liability, Product Liability, Director & Officer Liability, and International insurance coverage.