Insurance Curator Professional Liability Insurance (Errors & Omissions, or E&O) protects professionals and service businesses against claims alleging negligence, mistakes, or failure to perform professional services. In the United States — whether you're advising startups in San Francisco, consulting in New York City, designing systems in Houston, or offering financial planning in Miami — knowing real-world claim scenarios and how E&O responds is essential to managing risk and costs.
This guide explains common claims scenarios, typical exclusions, cost expectations from major carriers, and practical tips when evaluating coverage in specific U.S. markets.
Quick overview: What E&O is for — and what it isn’t
- Covers alleged professional negligence, errors, omissions, and failure to deliver promised services.
- Does not cover bodily injury/property damage (that's General Liability), intentional wrongdoing, criminal acts, or most breach-of-contract cases unless specifically endorsed.
- Often includes defense costs (subject to policy wording: whether they erode limits or are in addition to limits).
For a deeper breakdown of policy components, see Breakdown of Coverages Inside Professional Liability Insurance (Errors & Omissions): What to Expect.
Typical claims scenarios — covered vs. not covered
The table below summarizes common scenarios professionals face, whether E&O typically responds, and a short note on how it’s handled.
| Scenario | Typically Covered? | Why / How it Responds |
|---|---|---|
| Missed deadline causing client financial loss (e.g., delayed tax filing advice) | Yes | Allegation of negligent performance — defense + indemnity up to policy limit. |
| Faulty professional advice (bad financial/IT/marketing advice) | Yes | E&O addresses claim for negligent advice causing economic loss. |
| Breach of contract — client sues for non-performance | Sometimes | Pure breach often excluded; however, many policies cover associated negligent acts. See Breach of Contract and E&O: How Professional Liability Insurance (Errors & Omissions) Responds. |
| Third-party bodily injury from a product or site visit | No | General Liability covers bodily injury, not E&O (professional negligence). |
| Intentional fraud or dishonest act | No | Most E&O policies contain intentional acts/fraud exclusions. |
| Defamation (libel/slander) arising from professional report | Sometimes | Some policies include media/PR or personal injury extensions; otherwise may be excluded. |
| Cyber incident causing client data breach | No (unless endorsed) | Cyber liability typically separate; add-on endorsements are available. See Endorsements and Add-Ons: Expanding Professional Liability Insurance (Errors & Omissions) Coverage. |
| Claim from a subcontractor or third party | Sometimes | Depends on policy wording and whether claim alleges your negligence. See Does Professional Liability Insurance (Errors & Omissions) Cover Third-Party Claims? A Deep Dive. |
Real examples by profession and U.S. location
- Los Angeles / San Francisco (California) — A digital marketing agency misses launch specs for a $200K campaign. Client claims lost revenue. E&O typically covers negligent professional services; legal defense may be required immediately.
- New York City, NY — An independent financial advisor gives investment allocation advice that allegedly causes client losses. E&O may respond to negligence claims, but regulators’ investigations and criminal allegations are excluded.
- Houston / Dallas, TX — An engineering consultant’s design error causes project delays and extra costs. Engineering firms often carry higher limits; E&O plus professional indemnity commonly triggered.
- Miami, FL — A travel consultant fails to advise correctly on insurance and visas; clients incur costs. E&O typically responds to alleged negligent advice.
Pricing expectations — national carriers and sample figures
E&O pricing varies by profession, revenue, claim history, limits, and state. Here are illustrative figures from well-known U.S. providers and market data (accurate as of mid-2024):
- Hiscox (small-business E&O): policies for low-to-moderate risk consultants can start around $20–$50 per month (roughly $240–$600/year) for basic limits and low exposure. Source: Hiscox small-business E&O offerings.
- The Hartford: typical small business E&O premiums often range $400–$1,500 per year depending on industry and limits; specialized professions cost more. Source: The Hartford business insurance resources.
- Market average (Insureon / industry data): most small businesses pay $500–$2,500 per year for standard E&O coverage; higher-risk professions or larger revenues push premiums into the thousands.
Important notes:
- Large professional services firms (e.g., large IT consultancies, architectural firms) often pay $10,000+ per year for high-limits or specialty coverage (Chubb, AIG, or other carriers).
- Premiums vary widely by state due to legal environment and claim frequency — e.g., California and New York policies can be costlier than in some Midwest states.
Defense costs: who pays and why it matters
E&O policies either:
- Include defense costs that are in addition to the policy limit (defense outside the limits — better protection), or
- Have defense costs erode the limit (defense inside the limit — reduces amount available for indemnity).
For clarity on this critical distinction and who pays in different scenarios, see Defense Costs and Professional Liability Insurance (Errors & Omissions): Who Pays What?.
Why this matters:
- If defense costs are inside the limit, a single expensive legal defense can exhaust coverage and leave no funds for settlement.
- Policies with duty-to-defend clauses and explicit defense-outside-limits clauses are generally more protective but more expensive.
Common exclusions and costly gaps to watch for
- Bodily injury / property damage — requires General Liability or Professional General Liability package.
- Cyber / privacy breaches — typically excluded; purchase a cyber liability policy or endorsement.
- Contractual liability — many policies exclude assumed liability through contracts; add endorsements if you often sign hold-harmless clauses.
- Employment practices claims — covered by Employment Practices Liability Insurance (EPLI), not standard E&O.
- Prior acts (retroactive date) limits — claims from services before policy’s retroactive date are excluded.
Consider adding endorsements for:
- Breach-of-contract coverage
- Cyber/privacy coverage
- Third-party liability extensions
- Regulatory defense coverage
See Additional Coverages to Add to Your Professional Liability Insurance (Errors & Omissions) Policy for practical options.
How to evaluate and buy E&O in your city or state
- Identify your risk profile: profession, annual revenue, client contract terms, project sizes.
- Choose appropriate limits: common small-business limits are $1M per claim / $2M aggregate; higher-risk practices often choose $2M/$4M or more.
- Compare carriers: Hiscox, The Hartford, Travelers, Chubb, CNA, and regional carriers — compare quotes and policy wording.
- Review defense language and retroactive dates closely.
- Add endorsements for gaps: cyber, breach-of-contract, regulatory defense if you operate in high-risk markets (e.g., NYC finance, CA tech).
Final checklist before you sign
- Confirm retroactive date and prior acts coverage.
- Verify whether defense costs erode limits.
- Ensure coverage applies across states where you operate (multi-state clients).
- Ask about claims-made vs. occurrence wording — most E&O are claims-made and require continuous coverage or a tail policy when you discontinue.
- Get written clarification on third-party subcontractor claims and contractual indemnities.
For scenario-specific coverage questions — for consultants, advisors, or service-specific examples — consult Service-Specific Coverage: What Professional Liability Insurance (Errors & Omissions) Covers for Consultants and Advisors.
Sources
- Hiscox — Errors & Omissions Insurance (U.S. small business offerings): https://www.hiscox.com/small-business-insurance/errors-and-omissions-insurance
- The Hartford — Professional liability insurance for businesses: https://www.thehartford.com/business-insurance/professional-liability
- Insureon — Errors & Omissions Insurance Cost Guide: https://www.insureon.com/errors-and-omissions-insurance/cost
If you want, I can prepare a customized comparison of quotes for your profession and city (e.g., Los Angeles vs. New York City vs. Houston) to estimate premiums and recommended limits.