errors and omissions
Definition
Errors and omissions (E&O) refers to a type of professional liability insurance that protects you if a client claims your work, advice, or services caused them financial harm due to a mistake or something you forgot to do. Think of it as a safety net for the professional judgment calls you make every day in your business. If a client sues you because they say your error cost them money, this insurance covers your legal defense and any damages you owe.
Example
If you are a bookkeeper who accidentally miscategorized expenses for a client and they ended up with a big tax penalty, your E&O insurance would step in to cover the lawsuit they file against you.
Watch Out
Many small business owners assume their general liability insurance covers professional mistakes, but it does not, so you likely need a separate E&O policy if you provide any kind of advice or service.
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This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.