What Is Typically Excluded from an E&O Policy?

Errors and omissions (E&O) insurance is a type of professional liability insurance that protects businesses and professionals from claims of inadequate work, negligence, or errors in the services they provide. E&O insurance can help businesses cover the legal costs, settlements, or judgments that may arise from such claims. However, E&O insurance doesn’t cover everything. When it comes to buying business insurance, San Diego business owners need to be aware of these exclusions and limitations before purchasing this type of policy.

Criminal or Fraudulent Acts

Errors and omissions insurance isn’t designed to protect professionals who intentionally act in bad faith or commit fraud. Any intentional or criminal acts will not be covered by this policy. For example, if an accountant embezzles money from a client or a lawyer falsifies documents, E&O insurance won’t cover the losses or damages caused by these actions. These are intentional and dishonest acts that are outside the scope of professional services.

Bodily Injury or Property Damage

E&O insurance is distinct from general liability insurance, which covers bodily injury and property damage claims. If a professional causes physical harm or property damage, E&O insurance won’t provide coverage. For example, if a landscaper accidentally cuts a power line and causes a fire or a veterinarian injures an animal during surgery, E&O insurance won’t cover the medical expenses or repair costs. 

Employee Injuries or Discrimination

While E&O insurance addresses claims related to professional services, it doesn’t extend to employment disputes. Issues like employee injuries, wrongful termination, discrimination, or harassment aren’t covered under this policy. For example, if an employee gets hurt on the job or sues the employer for harassment, E&O insurance won’t cover the workers’ compensation or legal fees. These are employment-related issues that are usually covered by workers’ compensation insurance or employment practices liability insurance.

Personal or Advertising Injury

E&O insurance doesn’t cover any claims that involve personal or advertising injury to third parties. For example, if a marketing firm slanders a competitor or infringes on a trademark, E&O insurance won’t cover the defamation or intellectual property damages. These are reputational or commercial harms that are often covered by general liability insurance or other types of business insurance.

Warranty or Guarantee Breaches

E&O insurance doesn’t cover any claims that stem from warranty or guarantee breaches by the insured. For instance, if a software developer promises a certain level of performance or functionality but fails to deliver, E&O insurance won’t cover the refund or compensation demanded by the client. These are contractual obligations that aren’t considered professional errors or omissions.

Known Claims & Prior Acts

E&O insurance generally doesn’t cover claims arising from incidents that occurred before the policy’s inception date. Additionally, if the professional was aware of a potential claim but didn’t disclose it when he or she purchased the policy, the claim may not be covered.

Property or Data Loss

Loss of physical property or data due to errors in professional services is typically not covered by E&O insurance. For such incidents, professionals should explore other types of insurance, such as cyber insurance or property insurance.

Punitive Damages

In many cases, E&O insurance doesn’t cover punitive damages, which are intended to punish the professional rather than compensate the injured party. These damages can be substantial and financially crippling for a professional without adequate coverage.

Nonprofessional Activities

If a claim arises from activities unrelated to professional services covered under the policy, E&O insurance may not provide coverage. Personal activities or services outside the professional scope are typically excluded.

How to Get E&O Insurance

If you’re a business owner or a professional who provides services to clients for a fee, you may need E&O insurance to protect yourself from potential lawsuits. You can get E&O insurance from many major commercial insurers who offer this type of coverage for various industries and professions. The cost of E&O insurance will depend on factors such as your industry, projected risk, revenue, deductible, policy limits, and claims history. 

E&O insurance is an important part of your risk management strategy as a business owner or professional. It can help you avoid costly legal fees and settlements that could jeopardize your reputation and your finances. For affordable, reliable commercial insurance as well as homeowners, renters, motorcycle, and car insurance Chula Vista, call on the trustworthy professionals at Altra Insurance Services. Reach out to us today at (619) 404-6311 to learn how we can satisfy all your insurance needs.