Errors and Omissions Insurance (E&O) is a separate rider that can be purchased with a business liability policy. This type of insurance is mainly used by professionals that deal in contractual areas of the law. This includes real estate agents, lawyers, accountants and Notary Publics. Other businesses can purchase Errors and Omissions insurance if they believe actions they take may leave them at risk of liability.
An Errors and Omissions Insurance policy protects the individual or company from accepting total liability when a mistake has been made that has caused financial harm to another person. For example, if a real estate agent fails to disclose a property was subject to a natural disaster, and the damages from that disaster later caused monetary damage to the new owner, the purchaser could sue the agent for damages. If the agent has an E&O policy, this policy will cover the damages up to the amount of the policy.
These policies are often cost prohibitive for a smaller company or individual to purchase. Type of profession and risk assessment will determine the cost of the insurance policy. Again, this type of policy is above any business liability policy the company may hold.
Some states require certain professions to carry Errors and Omissions policies to practice their trade in their state. Florida, as an example, requires architects and builders to carry these policies as well as Notary Publics. These requirements are part of their licensing in the state. Each state has separate requirements and this should be verified with the State Department of Insurance.
Accountants often carry this type of policy to cover any mathematical mistakes that may occur in their calculations. If a client is damaged financially through your accounting methods, they can seek damages through your E&O insurance.
Malpractice Insurance is the name for Errors and Omissions insurance in the medical field. This is the exact same type of policy, except it refers to damages that have caused physical harm. All doctors are required to carry malpractice insurance. Now, with the emergence of many nurse-practitioners, malpractice insurance requirements have been extended to other parts of the medical trade.