Examples of Errors and Omissions insurance claims

Errors and omissions insurance claims often start with small business issues — a missed deadline, a detail that slips through the cracks or advice a client didn’t interpret the way you intended. If a client believes your professional services caused them a financial loss, an E&O insurance claim against you and your insurance may follow. Read these common E&O claim scenarios for a peek into how these disputes arise and how E&O insurance could help cover costs and defend your business.

Errors and omissions insurance (also called E&O insurance or professional liability insurance) is designed to help cover claims tied to mistakes, missed details or professional services that don’t go as planned. While every situation is different, E&O claims often stem from everyday work issues like these:

• Work mistakes: An IT consultant misconfigures a system, leading to unexpected downtime for a client.**
• Oversights: A bookkeeper overlooks a key expense, resulting in inaccurate financial records.
• Missed deadlines: A web designer launches a page later than anticipated, affecting the client’s sales timeline.
• Professional negligence: An insurance agent recommends a policy that doesn’t include coverage the client believed was part of their protection.
• Breach of a client contract: A real estate agent fails to submit an offer or required paperwork by the agreed deadline, affecting the timing or outcome of buying or selling a property.

If a client claims your professional services caused them a financial loss, E&O insurance could help cover the costs associated with defending your business, including:

• Legal defense costs
• Expert witness fees
• Court costs
• Settlements or judgments related to covered claims

If a client files a lawsuit, your insurance company will begin the claims process to review what happened and whether the claim is covered under your policy.

Some important points to remember about E&O claims:

• E&O claims usually focus on financial loss. These claims are often tied to the cost of correcting work, lost income or other monetary impacts — not bodily injury or property damage, which are usually excluded.
• Accusations count, even if you disagree with them. A client can allege that you made a professional error or omission, even when you believe you did everything correctly. Defending yourself against these claims can take time and money, regardless of whether or not the allegation is correct.
• Notify your insurer as soon as a dispute becomes formal. When a client issue turns into a written complaint or legal threat, it’s best to notify your insurer and determine whether you should open a claim.
• A claim adjuster will investigate covered claims. Your insurer will assign a claims adjuster to review your claim and help manage the resolution.

4 examples of Errors and Omissions insurance claims

These are some common examples of E&O insurance claims in professions where accuracy, documentation and timing matter.

1. A client pays penalties because of an alleged tax filing error

Working as an accountant, you prepare and file taxes for a small business client. Months later, they receive a notice from the IRS for penalties and interest tied to an error on the return.

Your client is upset and claims that your mistake led to unexpected penalty costs. An E&O claim may help you cover your legal defense related to allegations of professional negligence and financial loss.

2. Incorrect property disclosures mean a buyer can’t use their building as planned

You’re a real estate agent helping a buyer get property for future development. However, after closing, your client learns about zoning restrictions that weren’t disclosed at the sale that prevent them from moving forward with their project.

Your client decides to sue you, claiming you were aware of the restrictions but didn’t disclose them. They allege the omission caused them a significant financial loss and time invested in a bad purchase. An E&O claim could help pay for your defense costs and a potential settlement.

3. A client expected insurance coverage not included in their policy

As an insurance agent, you help business owners get the right coverage. A commercial client asks you for “full coverage” on their warehouse. You sell them a policy, but flood coverage isn’t included — and the exclusion isn’t clearly discussed.

After a flood causes them major damage, the client’s claim is denied. The client alleges you failed to give them the coverage they’d asked for and you didn’t explain policy limitations clearly. An E&O claim could help cover attorney fees and court costs tied to these allegations.

4. A client follows your professional advice — and loses revenue

You’re a management consultant who advises a retail client to close several physical locations and shift heavily into e-commerce. Your client is all-in, and they follow your advice. However, your projections overestimate online demand and underestimate the cost of the transition.

When the strategy leads to revenue losses and layoffs, the client claims your advice fell short of professional standards. An E&O claim may help cover costs associated with defending against allegations tied to professional judgment and decision making.

How to get Errors and Omissions insurance with ERGO NEXT

ERGO NEXT makes it fast, easy and affordable to protect your small business — and you can do it all online.

We’ll ask a few questions about your business and give you a quote. You can select your coverage options and buy your policy in about 10 minutes. Share your certificate of insurance at no extra cost, and you can access your policy 24/7 via web or mobile app.

If you have questions, our licensed, U.S.-based insurance professionals are available to help.

Start a free quote with ERGO NEXT.