What's the Difference between General Liability and E&O Insurance?
In your search for adequate small business insurance, you’ve stumbled across two policies that seem to promise the financial protection you’re after: General Liability Insurance and Errors & Omissions Insurance. What’s the difference between them? And which is right for you? Let’s compare these two policies.
What Is General Liability Insurance?
Think of General Liability Insurance as the foundation of your business protection plan. This policy offers a range of liability protection that most businesses need to thrive, no matter their size. A standard GL policy covers lawsuits over…
- Non-employee bodily injuries on your commercial property.
- Damage you caused to someone else’s property while carrying out your work.
- Advertising injuries (e.g., slander, libel, infringement, misappropriation, etc.).
When these claims are made against your small business, your policy steps in to cover your legal expenses, including lawyers’ fees, court costs, and settlements or judgments. All told, your coverage can save your business from paying hundreds of thousands of dollars out of pocket.
What Is Errors and Omissions Insurance?
Errors and Omissions Insurance is more focused than General Liability. Though this policy also covers lawsuits, it only shields you from those that arise from the professional work you do.
Another name for E&O Insurance is Malpractice Insurance – a coverage most doctors are required to carry. If the doctor is accused of making a misdiagnosis that costs their patient thousands in extra medical care, the patient can sue for damages.
But it’s not only doctors that benefit from this coverage. Any professional service provider should carry E and O Insurance to help pay for lawsuits alleging that they…
- Provided negligent professional services.
- Failed to meet contractual obligations.
- Failed to uphold a certain standard of care.
- Made errors or oversights.
You don’t have to actually be at fault for these claims to cost a fortune in legal fees. A disgruntled client could simply be unhappy with the results of your work and decide to sue you to make up their losses. E&O helps ensure you don’t pay for lawsuit expenses.
GL and E&O Similarities
Here’s how General Liability and E&O Insurance are similar:
- Both polices cover certain unavoidable liabilities. If you have an office building that’s open to the public, you can’t avoid the risk of someone getting hurt on your property. If you provide professional services, there’s always the risk that someone will accuse your work of causing them financial losses.
- Both policies may be required by your client contracts. If you are a construction contractor, the general contractor may require you to carry your own General Liability Insurance. The same goes for professionals who work with big-fish clients: they may demand you carry a certain amount of E&O coverage before you can land the deal. In both instances, the other party is trying to limit their own liabilities incase something goes awry with your work.
- Some GL policies have work liability protection. For example, construction professionals likely have GL policies that include Products-Completed Operations Liability Insurance. This coverage protects the policyholder from lawsuits over finished work that physically hurt someone. For instance, if a contractor builds a deck that collapses, the homeowner could sue for damages if they are injured.
- Both policies are usually “claims-made” coverage. Claims-made coverage means you can only collect your insurance benefits if both the alleged incident and the filed claim happen while your same policy is active. So, in the example of the collapsing deck, your GL policy would have to be in force both when you built the deck and once you caught word that the deck collapsed.
GL and E&O Differences
Here’s how the policies fundamentally differ:
- They cover different risk exposures. You can’t rely on an E and O policy to protect you when a client falls on your property and sues you for medical expenses. Only General Liability covers that expense. Similarly, you can’t depend on GL coverage to step in when you’re sued for failing to uphold professional standards of care – that’s E&O’s territory.
- They offer different scopes of protection. General Liability lives up to its name – it’s generalized liability coverage for lawsuits, property damage, and advertising injuries. E and O only covers lawsuits over financial losses someone experienced because of your work.
When Do You Need Both GL and E&O Policies?
As you can see, both policies cover liabilities that any small-business owner may have. You should consider carrying both policies if your offer professional services AND at least one of the following is true:
- You handle or visit client property.
- You make and / or sell products.
- You use social media and / or advertise your business.
- People other than employees (clients, delivery people, etc.) visit your business premises.
When Would You Need Neither Policy?
There are rarely instances when a small-business owner wouldn’t need either General Liability or Errors & Omissions Insurance. But for the sake of the thought experiment, let’s dream up an example. You could feasibly get away with not having either coverage if…
- You don’t offer professional services of any variety.
- Your place of business is never open to the public (and you never have mail delivered there. Yes, even a postal worker could sue you for premises liability if they are hurt on your property).
- You don’t sell or make goods / products.
- You never handle client property.
- You don’t market your business online or elsewhere.
Get General Liability and E and O Quotes Online
You’ve worked hard to build your business. Let General Liability and Errors & Omissions Insurance work hard to protect it. Fill out an online insurance application to get quotes today.