Question 1

What is the difference between E&O and general liability insurance?

Accepted Answer

General liability covers bodily injury and property damage caused to third parties — a client slips in your office, you accidentally break a client's equipment during a site visit. E&O covers the financial losses clients claim your professional work caused: a calculation error in a deliverable, incorrect advice that cost them a deal, a missed deadline that caused measurable harm. Most professional service businesses need both coverages.

Question 2

What does 'claims-made' mean for E&O insurance?

Accepted Answer

A claims-made policy covers claims reported while the policy is active, provided the underlying work falls after your retroactive date. This differs from an 'occurrence' policy, which covers incidents that happen during the policy period regardless of when the claim is filed. Claims-made is the standard structure for E&O. Maintaining continuous coverage without gaps — and always establishing a retroactive date at policy inception — is essential.

Question 3

What is tail coverage (Extended Reporting Period) and when do I need it?

Accepted Answer

Tail coverage lets you report claims after your E&O policy expires for work done while it was active. You need it when canceling or switching carriers, selling your practice, or retiring. Without tail coverage, a client could sue you for work done years ago after your policy has lapsed and you would have no coverage. Most E&O policies include a short automatic tail of 30–60 days; a full extended tail typically costs 100–200% of the annual premium.

Question 4

How much E&O coverage do I need?

Accepted Answer

Most solo practitioners and small firms start with $1,000,000 per claim / $1,000,000 aggregate. If you work with enterprise clients, handle large financial transactions, or your contracts specify higher requirements, $2,000,000 to $5,000,000 may be appropriate. The key benchmark: if a client could lose $3,000,000 because of an error in your work, you should carry at least that much coverage. Contracts often specify minimums, so always review before quoting.

Question 5

Does E&O cover intentional acts or fraud?

Accepted Answer

No. E&O coverage applies to negligent errors and omissions — honest professional mistakes. It explicitly excludes fraudulent, criminal, or intentional wrongdoing. If a final adjudication establishes that the insured committed fraud, most policies allow the carrier to withdraw from the defense and seek reimbursement of costs paid. The fraud exclusion does not apply during the defense phase before a finding — the carrier typically defends under a reservation of rights.

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