Understanding professional liability insurance
A mistake can lead to a financial loss even without bodily injury or property damage.
What is professional liability?
Also called errors and omissions (E&O) insurance in many industries, it may respond to covered allegations of negligent services, errors, or omissions.
Who may need it?
Consultants, technology providers, accountants, designers, and other service professionals often face contract or client expectations.
Why general liability may not be enough
General liability frequently does not cover pure financial loss caused by allegedly faulty professional work.
Important policy choices
Many professional policies cover a claim only if it is first made and reported while the policy is active. A retroactive date sets how far back the covered work may have started. Ask whether legal-defense costs reduce the policy limit and which services or contract promises are excluded.
Frequently asked questions
Is E&O the same as general liability?
No. They address different categories of claims.
Does professional liability guarantee contract performance?
No. Many contract and performance obligations are excluded or limited.
Example: a client disputes a deliverable
A client says a missed deadline or inaccurate recommendation caused financial loss. Professional liability may address certain claims tied to the listed service, but it does not guarantee contract performance or reimburse every refund, penalty, or rework cost. Check which services are listed and which contractual obligations are excluded.
Timing when changing insurers
Many policies cover claims made and reported during the policy period, even when the work happened earlier, subject to a retroactive date and reporting rules. Ask what date appears on the policy and what happens if you switch providers or retire. A gap in continuous coverage can matter. Have contracts and sample work descriptions available for review.