General liability vs. errors and omissions insurance

Errors and omissions insurance (E&O) protects professional service providers, including financial advisors, real estate agents, fitness trainers, against client lawsuits over unsatisfactory work. Depending on your industry, you might see this coverage called professional liability insurance or malpractice insurance.

An E&O policy covers legal costs if a client claims financial loss due to professional negligence, such as:

• Mistakes and oversights
• Failure to uphold contractual obligations
• Incomplete or substandard work
• Poor professional advice
• Unintentional misrepresentation
• Missed deadlines

These lawsuits can be very expensive for small businesses. Even if you’re not at fault, or if the claim is groundless or fraudulent, errors and omissions will cover your legal costs.

Here’s how general liability and errors and omissions insurance are similar:

Both policies cover certain unavoidable liabilities. If you have an office building that’s open to the public, you can’t completely avoid the risk of an accident that injures someone on your property. Likewise, 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 client contracts. A general contractor might require a subcontractor to carry their own general liability insurance. The same goes for professionals who work with large clients; the clients may ask your business to carry a certain amount of E&O coverage before they'll work with you. In both instances, the other party is trying to limit their liabilities in case something goes awry with your work.

Some general liability policies have work liability protection. For example, construction professionals likely have general liability policies that include product 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're injured.

Professional liability insurance is usually claims-made, while general liability insurance is typically occurrence-based. Claims-made coverage generally requires the claim to be reported while the policy is active. Occurrence coverage can respond to claims filed later, as long as the incident happened during the policy period. In the example of the collapsing deck, the general liability policy that was in force when the deck was built could respond to the claim, even if the lawsuit is filed later.

As you can see, both policies cover liabilities that any small business owner might have. You should consider carrying both policies if you offer professional services and at least one of the following is true:

• You handle or visit client property
• You make or sell products
• You use social media or advertise your business
• People other than employees (clients, delivery people, etc.) visit your business

Complete Insureon's easy online application today to compare general liability insurance and E&O quotes from top-rated U.S. companies. Once you find the right policy for your small business, you can begin coverage in less than 24 hours.