What is E&O insurance?
Errors and Omissions (E&O) Insurance, also known as Professional Liability Insurance, protects companies and professionals against claims arising from inadequate work, professional mistakes, missed deadlines, or failure to deliver promised services. Unlike D&O which covers management decisions, E&O covers the professional services the company sells: software defects, consulting advice, design errors, financial advisory, legal/medical/accounting malpractice. E&O is essential for technology, professional services, and SaaS companies: clients sue for damages when products fail or services fall short.
E&O coverage typical scope
- Negligent acts: mistakes in professional judgment.
- Errors and omissions: failure to perform contracted services.
- Misrepresentation: incorrect statements made in professional capacity.
- Defense costs: legal fees, even for groundless claims; typically within policy limits.
- Settlements and judgments: court awards or negotiated settlements.
Industry-specific E&O variants
- Tech E&O: software defects, downtime, data loss, IP infringement: often bundled with cyber liability.
- Architects & Engineers E&O: design errors, building defects, code violations.
- Legal Malpractice: attorney professional liability.
- Medical Malpractice: physician/clinic E&O.
- Financial Advisory: investment advice, brokerage errors.
Common E&O exclusions
- Intentional acts and fraud: excluded; covered under criminal/civil actions.
- Bodily injury / property damage: covered by general liability.
- Employment-related claims: covered by EPL (Employment Practices Liability).
- Patent infringement: often excluded; needs separate IP coverage.
- Prior known matters: retroactive date applies.
E&O in the tech stack
Errors-and-omissions (professional indemnity) cover answers a different question than D&O: not “did the directors mismanage,” but “did the product or service fail the client.” For software companies the policy reads through three lenses: coverage triggers (claims-made policies make the retroactive date and tail decisive), the technology wording (does “professional services” include SaaS performance failures, security events, IP infringement allegations, or do those need cyber and IP riders), and contract alignment: customer MSAs that promise “insurance of $X per claim” must match the certificate, and liability caps negotiated in contracts set the realistic exposure the limits should cover. In enterprise sales and M&A diligence, the E&O certificate is checked against the contract stack; mismatches surface as either re-papering or price.
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