If your business provides professional services or advice, you are exposed to claims that your work was negligent, inaccurate, or caused financial harm to a client. Professional liability insurance — also called Errors & Omissions (E&O) insurance — protects you against these claims. Here’s what you need to know.
What Professional Liability Insurance Covers
Professional liability insurance covers claims alleging that you made a mistake, omission, or negligent act in the performance of your professional services. It pays for your legal defense, settlements, and judgments. Unlike general liability insurance — which covers physical harm — professional liability covers economic harm: financial losses your client suffers because of your error or failure to perform.
Who Needs Professional Liability
Any business that provides professional advice, designs, assessments, or services to clients should carry professional liability insurance. This includes consultants, engineers, architects, IT professionals, marketing firms, attorneys, accountants, insurance agents, and a wide range of specialty service providers. Even if you’re confident in the quality of your work, clients can claim damages when outcomes fall short of their expectations.
Claims-Made vs. Occurrence Policies
Most professional liability policies are written on a claims-made basis — meaning the policy must be in force both when the error occurred and when the claim is reported. This is different from general liability, which is typically written on an occurrence basis. When you change insurers or retire a policy, it’s essential to secure extended reporting endorsements (tail coverage) to protect against claims that surface after the policy expires.
How E&O Claims Happen
E&O claims often arise not from intentional wrongdoing but from miscommunication, scope creep, missed deadlines, inadequate documentation, or a client’s unrealistic expectations. Proactive risk management — including clear contracts, detailed project documentation, and regular client communication — reduces claim frequency. But it doesn’t eliminate it, which is why insurance remains essential.
Bozzuto Group Specializes in E&O for Complex Businesses
Professional liability insurance for businesses in specialty industries — cannabis, hemp, natural products, and emerging technology — requires a broker who understands your unique risks. Bozzuto Group has the expertise to find the right E&O solution for your business. Contact us to learn more.