Definition:Errors and omissions (E&O)
📋 Errors and omissions (E&O) is a form of professional liability insurance that protects individuals and firms against claims arising from negligent acts, mistakes, or failures to perform professional duties. Within the insurance industry, E&O coverage carries a dual significance: it is both a product that insurers sell to professionals across many disciplines — attorneys, accountants, architects, consultants, and technology firms — and a critical safeguard that insurance brokers, agents, MGAs, and other intermediaries must carry to protect themselves against allegations of professional negligence in placing or administering coverage.
⚙️ An E&O policy is typically written on a claims-made basis, meaning it responds to claims first reported during the policy period, regardless of when the underlying act or omission occurred — provided the act falls after the policy's retroactive date. When a covered claim arises, the insurer provides a defense and, if necessary, pays damages up to the policy limit, subject to any applicable deductible or self-insured retention. For insurance intermediaries specifically, E&O claims often stem from allegations such as failure to procure requested coverage, placing a policy with an insolvent carrier, misadvising a client on policy terms, or neglecting to notify an insurer of a claim within required time frames. Regulators in many jurisdictions — including U.S. state insurance departments and the FCA in the United Kingdom — require licensed intermediaries to maintain minimum E&O coverage as a condition of doing business.
💡 Beyond satisfying regulatory mandates, robust E&O protection plays a vital role in sustaining trust within the insurance distribution chain. Carriers granting delegated underwriting authority routinely require their coverholders and appointed intermediaries to demonstrate adequate E&O limits before entering into binding authority agreements. At Lloyd's, for instance, coverholders must meet prescribed minimum E&O requirements as part of the market's quality assurance framework. For the broader professional services market, E&O underwriting demands deep expertise in evaluating the unique exposures of each profession, making it a specialty line that rewards insurers with strong claims management capabilities and actuarial insight into long-tail liability development patterns.
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