Errors and Omissions (E&O) Insurance

Errors and Omissions (E&O) Insurance, also called Professional Liability Insurance or Malpractice Insurance, protects professional service providers against claims arising from errors, omissions, or negligent acts in the rendering of professional services. E&O is distinct from CGL: E&O addresses economic loss from professional services (bad advice, defective software, inaccurate appraisals); CGL addresses bodily injury and property damage from operations (slip and fall, premises injuries).

Common categories of professional liability

Profession-specific E&O products: (1) lawyers, legal malpractice insurance; covers errors in advice, missed deadlines, conflicts; (2) accountants, accounting malpractice; covers tax preparation errors, audit failures, advisory errors; (3) medical professionals, medical malpractice; subject to Tex. Civ. Prac. & Rem. Code Ch. 74 caps and procedures; (4) architects and engineers, design professional liability; covers design defects, code violations, schedule failures; (5) technology providers, tech E&O; covers software defects, IT consulting errors, integration failures; often combined with cyber; (6) insurance agents and brokers, covers placement errors, coverage gaps, application misrepresentations; (7) real estate professionals, covers misrepresentation, disclosure failures, transactional errors; (8) financial advisors, covers investment advice, suitability errors, supervision failures; (9) consultants, covers strategic and operational advice errors.

Standard coverage structure

E&O policies typically include: (1) professional services definition, defines covered services; precision is critical (broad definitions provide more coverage); (2) per-claim limit, maximum payable per claim; (3) aggregate limit, maximum payable for all claims in policy period; (4) retention/deductible, insured's obligation per claim; (5) defense within or outside limits, whether defense costs erode the coverage limit (within) or are paid in addition (outside); (6) claims-made trigger, covers claims first made during policy period; (7) retroactive date, coverage extends back to this date for prior acts; (8) extended reporting period (tail), option for tail coverage at policy end.

Common exclusions

Standard E&O exclusions: (1) fraudulent or criminal acts, typically requires final adjudication; (2) known prior claims and circumstances, events known before inception; (3) contractual liability beyond what would exist absent contract; (4) express warranties and guarantees, affirmations of specific results; (5) insured vs. insured in some forms; (6) bodily injury and property damage, routed to CGL; (7) employment practices, routed to EPLI; (8) profit/personal advantage; (9) regulatory fines and penalties, varies; (10) specific high-risk activities by profession (e.g., securities offerings for accountants without endorsement).

The "claim" trigger

E&O claims-made coverage requires (1) a claim first made during the policy period and (2) reported during the policy period (or extended reporting period). "Claim" is typically defined broadly: written demand for monetary or non-monetary relief, civil proceeding, criminal proceeding, regulatory proceeding. The first claim arising from related acts triggers coverage; all subsequent claims based on the same wrongful acts relate back to the first claim. This "interrelatedness" provision means a series of claims based on the same underlying act is treated as one claim for limits and retention purposes.

Retroactive date and tail coverage

E&O policies typically include a retroactive date, the date back to which the policy covers prior acts. Acts occurring before the retroactive date are not covered, even if the claim is made during the policy period. Tail coverage (Extended Reporting Period or ERP) extends the policy to cover claims made after the policy ends but for acts during the policy period (subject to retroactive date). Tail coverage usually comes up at (1) a carrier change; (2) the end of a practice (retirement, dissolution); (3) an acquisition of the practice; and (4) other changes of control. Its price and length are set by the policy and the carrier.

Texas Medical Liability Act overlay

For medical professionals, Texas Civil Practice and Remedies Code Chapter 74 (Texas Medical Liability Act) imposes specific procedures: (1) written notice of the claim at least 60 days before suit, with a medical-records authorization (§§ 74.051-.052), and an expert report served within 120 days after each defendant's original answer (§ 74.351); (2) statute of repose (10-year outer limit); (3) damages caps on non-economic damages ($250,000 per claimant against all physicians and other non-institutional providers combined, $250,000 per claimant against a single health care institution, and $500,000 per claimant against all institutions combined); (4) heightened pleading and proof requirements.

Coordination with other policies

E&O often coordinates with other coverages: (1) CGL for premises and operations exposure; (2) cyber for data and technology incidents (some policies combine tech E&O with cyber); (3) D&O for executive-level decisions; (4) EPLI for employment-related claims; (5) fiduciary liability for ERISA matters. Some carriers write technology E&O and cyber coverage together in a single policy.