Errors and Omissions (E&O)
Errors and omissions (E&O) insurance is professional liability coverage for claims that a business's services, advice, or work caused a client financial harm through mistakes, negligence, or failure to perform. It generally excludes bodily injury and property damage. See Errors & Omissions.
Last updated October 13, 2026
How errors and omissions insurance works
E&O responds when a client or customer alleges that a professional service or work product was flawed, late, incomplete, or not delivered as promised, and that the flaw caused a financial loss. The term is used interchangeably with professional liability. Some industries prefer one name, and technology companies often buy a version called technology E&O.
Policies are typically written on a claims-made basis. Coverage generally depends on the claim being made and reported during the policy period, and on the retroactive date. Defense costs often count against the limit. Most forms cover economic loss to third parties, not bodily injury or property damage, which are usually handled by general liability.
What E&O typically covers in practice
- Negligent performance. Mistakes in the work, such as an error in code, a calculation or a recommendation.
- Failure to perform. Missed deadlines, incomplete work or services that were not delivered as promised, to the extent the policy treats them as covered wrongful acts.
- Inaccurate advice. Advice or analysis that a client relied on and that caused financial harm.
- Defense costs. The cost of responding to a lawsuit or demand, even if the allegation is later shown to be unfounded, subject to the policy terms.
Businesses that sell services, software, advice or data commonly buy it, including consultants, software and platform companies, agencies and financial services firms.
Example
A hypothetical software company provides payroll automation. A bug miscalculates a customer's tax remittances, and the customer claims losses and sues for breach of contract and negligence. Subject to the retention, limit, and exclusions, the E&O policy may pay defense costs and covered damages. It might not respond to amounts the company promised in its contract beyond its legal liability.
What to watch for
- Typical exclusions include intentional or dishonest acts, criminal conduct, liability assumed only by contract, bodily injury and property damage, and matters known before the policy began.
- The definition of "professional services" sets the scope. Make sure it describes what the company actually sells.
- Customer contracts with warranties, service-level guarantees, or unlimited liability can create exposure the policy does not match.
- Keep continuous coverage and a consistent retroactive date when renewing or changing carriers, so past work stays protected.
- Coverage for fee refunds, contractual promises, or regulatory matters varies by form, so ask what is included.
- Overlap with cyber coverage varies. Ask how a claim involving both a service failure and a data incident would be handled.
E&O vs. related terms
- E&O vs. general liability. Commercial general liability responds to bodily injury, property damage and certain advertising claims. E&O responds to financial loss from professional services. Many general liability policies exclude professional services, which is one reason both are often needed.
- E&O vs. cyber. Cyber liability addresses data breaches, system incidents and related response costs. E&O addresses failures in the service itself. A single event can involve both, and the policies handle overlaps differently.
- E&O vs. D&O. D&O protects leaders and the company against management and governance claims. E&O protects against claims from customers about the work delivered.
- E&O vs. technology E&O. Technology E&O is E&O adapted for technology companies, with definitions that fit software, platforms and technology services.
A second example: a data reconciliation failure
A hypothetical fintech platform provides a reconciliation tool to business customers. A change to the tool causes it to omit a category of transactions for several weeks, and a customer alleges that errors in its books led to overpaid fees and penalties. The customer demands compensation and refund of its fees. The company reports the demand to its E&O insurer during the policy period. The insurer reviews whether the allegations involve a covered professional service, applies the retention, and decides how the policy treats the fee refund, which some forms exclude or limit. The company's contract, including any limitation of liability, also affects what the customer can recover.
Questions to ask your broker or underwriter
- Does the definition of professional services describe everything we sell, including new products and AI-assisted features?
- Do defense costs sit inside or outside the limit?
- What is the retention, and does it apply to defense costs?
- What is the retroactive date, and does the policy include prior acts coverage?
- How does the policy treat liability assumed by contract, including indemnity promises and service-level guarantees? See indemnity.
- Is there a hammer clause or consent-to-settle provision?
- What happens to coverage for past work if we change carriers or the policy ends? See extended reporting period.
Common mistakes
- Buying a limit based on price alone, without comparing it to the size of the largest customer contracts.
- Signing contracts with unlimited liability or broad warranties without checking how the policy responds.
- Letting coverage lapse or changing the retroactive date, which can leave past work uninsured.
- Assuming a general liability policy covers professional mistakes.
- Reporting a customer complaint late because it was not yet a lawsuit.
Why it matters for technology, AI, fintech and digital-asset companies
Enterprise customers routinely require E&O or technology E&O limits in their contracts. Errors in software, financial calculations, or AI-generated output can cause customer losses, and whether a given AI-related claim is covered depends on the wording. See technology E&O and AI liability coverage.
Customers, partners and investors often request evidence of E&O or technology E&O coverage before signing or funding, so the policy limit and terms can affect deal timing. For AI and automated products, wording questions can be more specific: whether the definition of services includes AI-generated output, how the policy treats model errors, and whether any AI-related exclusion applies. Fintech and digital-asset platforms should check how the policy treats financial calculations, transaction processing and custody-related services. See fintech and AI and emerging tech for how these exposures are typically discussed.
See how this applies in practice: errors and omissions (E&O) insurance and tech E&O and cyber insurance.
Related terms
Related coverage
Frequently asked questions
What is errors and omissions insurance?
Errors and omissions (E&O) insurance is professional liability coverage for claims that a business's services, advice, or work caused a client financial harm through mistakes, negligence, or failure to perform. It generally excludes bodily injury and property damage.
Is E&O insurance the same as professional liability insurance?
In practice the terms are used interchangeably. Professional liability is the broader label, while E&O is common for technology, real estate, and insurance services. Policy wording still varies, so compare the insuring agreement and the definition of professional services rather than the name.
What does E&O insurance not cover?
Typical exclusions include bodily injury and property damage, intentional or dishonest acts, criminal conduct, liability assumed only by contract, and matters known before the policy began. Exact exclusions depend on the wording, so read the policy carefully.
Do software and AI companies need E&O insurance?
Many do because customers often require it in contracts, and software or AI errors can cause customer financial loss. Whether a specific claim is covered depends on the policy wording, scope of services, and any exclusions, so review the form with your broker.
How much E&O insurance does a company need?
There is no single answer. The right limit depends on the size of the contracts, the damage a failure could cause, customer or investor requirements and budget. Contracts often state a minimum, and a broker can help compare limits and retentions against the company's exposures.
Does E&O insurance cover breach of contract?
Generally it covers liability for negligent services that the company would owe even without a contract. Liability that exists only because of a contractual promise, such as a guarantee or an assumed indemnity, is often excluded or limited. The exact treatment depends on the policy wording.
Is E&O insurance claims-made or occurrence?
Most E&O policies are claims-made, so coverage depends on when the claim is made and reported and on the retroactive date, not when the work was done. That makes timely notice and continuous coverage important.
What affects the cost of E&O insurance?
Insurers typically consider the services provided, revenue, customer contracts, claims history, risk controls, and the limit and retention chosen. Pricing varies by insurer and market conditions, so compare quotes on both cost and terms.
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