Professional Liability (E&O)

How professional liability (E&O) actually works

Professional liability — errors & omissions — is the policy that stands between your professional judgment and a client’s lawyer. It responds when a client alleges your services, advice, or deliverables caused them financial loss: negligence, mistakes, missed deadlines, misrepresentation, or failure to deliver what the engagement promised. The insurer appoints and pays defense counsel, and pays settlements or judgments up to your limit. For most professionals, the defense benefit is the policy: even meritless claims cost tens of thousands to make go away, and E&O converts that risk into a fixed annual premium.

Nearly all E&O is written claims-made: the policy that responds is the one in force when the claim is made, not when the work was done — and it only reaches back to your retroactive date. That architecture makes three things matter enormously: continuous coverage (a lapse orphans your past work), the retroactive date (never let a carrier switch reset it), and tail coverage when you close, sell, or retire (extending the reporting window for late-arriving claims). These mechanics generate more coverage disputes than any policy exclusion.

What E&O does not cover

E&O excludes bodily injury and property damage (that’s general liability), your own data breaches (cyber liability), employee injuries (workers comp), intentional wrongdoing and fraud, and generally your fees themselves — a client refusing to pay isn’t a covered loss, though the counterclaim they file often is. Reading the exclusions against your actual services is the core of buying this coverage well; a policy is only as good as the match between its insuring agreement and what you really do.

Frequently asked questions

What limits should I buy?

Start with what your contracts require — $1M per claim is the commercial floor across most industries. Then consider your worst plausible claim: what could one error cost your largest client? Defense costs usually erode the limit, so a $1M policy is really “defense plus settlement up to $1M.” Stepping up to $2M typically costs far less than double.

What is the difference between claims-made and occurrence coverage?

Occurrence policies (standard for general liability) cover incidents that happen during the policy period, whenever the claim arrives. Claims-made policies (standard for E&O) cover claims made during the policy period for work after your retroactive date. Claims-made is why continuity, retro dates, and tails dominate E&O buying decisions.

When should I report something to my carrier?

At the first credible whiff — a demand letter, a client threatening “legal action,” even a circumstance you reasonably believe could become a claim. Claims-made policies require prompt notice, and late reporting is among the few ways to forfeit otherwise-valid coverage. Reporting a circumstance also locks coverage to today’s policy even if the suit arrives years later.

Does E&O cover independent contractors working under me?

Your policy covers claims against you arising from work performed on your behalf — but your subcontractors generally aren’t insureds under it, and their errors are still your client’s claim against you. Require certificates from subs, and make sure your policy’s definition of covered services includes subcontracted work.

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