In a business context, the term “Errors and Omissions” refers to a specific type of malpractice insurance coverage.  Errors and omissions coverage protects various types of businesses and professionals against mistakes which might cause financial harm to the organization.  It is also referred to as “E&O” insurance, and can be part of a larger professional liability insurance coverage package.

What Does Errors and Omissions Insurance Cover?

Errors and omissions insurance basically provides coverage for any claims issued from patients or clients who are issuing accusations of negligence due to error or omission.

For example, if the business professional made an error on a balance sheet, or if they omitted an important entry, the client may be seeking compensation if the mistake caused them losses.  E &O insurance would cover some or all of the costs that the professional might have to bear due to the error or omission.

It should be noted, however, that error and omissions insurance doesn’t generally cover any other negligent acts besides errors and omissions.  For example, it doesn’t cover negligence that might cause physical injury to a customer (like with a slip and fall claim).  These are usually covered by commercial general liability policies.

Who Uses E & O Insurance?

Errors and omissions insurance is frequently used by professionals and specialists, especially those whose line of work involves much accounting and many small details.  These can include:

  • Consultants
  • Real estate agents and brokers
  • Property appraisers
  • Architects and engineers
  • Attorneys
  • Software and website developers
  • Information technology specialists
  • Insurance agents

What are Some Common Legal Issues Associated With Errors and Omissions?

One of the most common pitfalls involved with errors and omissions is called a “Gap in Coverage”.  This is where the E&O insurance coverage has expired but the professional has failed to renew the insurance coverage.

During a gap in coverage, the business person is not covered by the insurance and is therefore exposed to liability during that time.  Even if the gap is only for one day, debilitating consequences can result, for example if an error was discovered on that day.  Gaps in coverage a major problem for business owners and operators, as many professionals might not know much about them or that they even exist.

Other common legal issues associated with errors and omissions policies can include breaches of insurance contracts, and frivolous claims being filed by clients in attempts to squeeze a damages award out of the business.

Do I Need a Lawyer for Help With Errors and Omissions Laws?

For business owners, it is very important to have a thorough understanding of what errors and omissions packages are, and what their limitations are.  If you have any questions or legal disputes regarding E&O insurance, it may be in your best interests to hire a consumer lawyer.  A qualified business attorney in your area can help explain what’s best for your business, and can represent you in a civil court of law if you need to file a lawsuit.