Professional liability insurance (also called errors & omissions or E&O insurance) can help provide financial protection for companies and professionals if a client alleges their work is inadequate or they committed a negligent act.

Professional liability insurance can help an insured pay for the following expenses, subject to policy limits:

Judgments: Monetary damages awarded to the plaintiff.
Attorney fees: Costs of hiring an attorney to defend the insured.
Court costs: Costs such as filing fees.
Settlements: Claim settled out of court.

While the terms and conditions of each policy will vary, professional liability insurance policies can help protect businesses from losses arising from claims that allege mistakes were made or faulty advice was offered in the course of providing professional services. It can help cover the costs arising from various service-based business liabilities, including:

Negligence. Professional negligence occurs when a professional breaches their duty of care or fails to perform their services to the required standards of their profession.
Errors. Losses resulting from errors, mistakes, or oversight in performing a service may be covered.
Omissions. Losses resulting from a professional leaving out important information that a client needs to know may be covered under an E&O insurance policy.
Misrepresentation. A professional that presents themselves as having experience in an industry when they don’t, may be considered a misrepresentation.
Inaccurate advice. A client who believes they have been financially harmed by a professional’s advice can bring a claim against the professional.

Who Should Consider Purchasing a Professional Liability Insurance Policy?

Businesses of all sizes and in most industries should consider obtaining a professional liability insurance policy. Some states require that certain types of businesses, such as healthcare professionals, maintain a specific type of professional liability insurance. Oftentimes, clients may contractually require a business to obtain and maintain professional liability insurance when agreeing to work together.

In general, these types of businesses may benefit from considering professional liability insurance, some of which require specific types of coverages and, therefore, have specific policy types available for their industry or business type:

Law firms
Consulting firms
Accounting firms
Tax preparation firms
Home inspectors
Real estate agents
Advertising and media agencies
Technology companies