Professional Liability Insurance | Errors and Omissions

Professional liability insurance coverage, also sometimes referred to as "errors and omissions" insurance, protects companies and individuals from claims of inadequate work. In general this is carried by businesses in the service industry and covers gaps of what isn't covered through a general liability policy. Your professional liability insurance cost will depend on the level of coverage you need.

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Eric Stauffer is a former insurance agent and banker turned consumer advocate. His priority is to help educate individuals and families about the different types of insurance they need, and assist them in finding the best place to get it.

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Written by Eric Stauffer
Founder & Former Insurance Agent Eric Stauffer

Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years Leslie Kasperowicz

UPDATED: Oct 29, 2021

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Errors and OmissionsProfessional liability insurance goes by many nicknames, but it is most commonly referred to as “errors and omissions” insurance.  Unlike other types of business liability policies, which protect primarily against injuries and physical property damage, PLI is meant to handle claims for economic damages.  In general, PLI is carried by businesses in the service industry, and it fills in the gaps of what would not be covered by a standard general liability policy.

What Professional Liability Insurance Covers

Liability insurance in general protects the insured against lawsuits arising from situations that are deemed to be their fault.  Liability coverage for businesses is particularly vital because many companies have substantial assets, which makes them an easy target for litigation.

Businesses could be held liable for many things, including injuries, property damage and economic losses caused by negligence.  In the case of service businesses, suits can also be filed when the customer feels they were given bad advice.  For example, an accountant whose financial recommendations were misleading and caused economic loss for a client.

Other types of situations covered by PLI:

  • Negligence
  • Slander and libel
  • Copyright infringement
  • Errors made by temporary staff or contract workers
  • Damages arising directly from services rendered in the past

A few things are not covered by PLI, including bodily injury, the loss of trade or patent secrets, fraud, false advertising and other acts of willful deceit.

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Who Needs Errors and Omissions Coverage?

Service professionals in every industry can benefit from professional liability insurance.  While other types of liability coverage protect your business from things outside of your control, PLI protects you from the potential errors or omissions that you and your employees may make.  In this way, it acts as a safety net in the event of mental business mistakes.

One important benefit of PLI is it typically pays for legal costs arising from negligence suits.  Even if you are found innocent of any errors and/or omissions, you might still face substantial legal expenses.  Professional liability insurance will pay for the cost of an attorney if the case goes to court, regardless of the outcome (assuming the incident was a covered loss).

How Much Does PLI Cost?

Like all types of liability insurance, the cost of PLI will depend on your company’s level of risk as well as the amount of coverage you buy.  Since it is a specialized type of coverage, it will tend to be more affordable than general liability insurance, and a low-risk business may be able to add this coverage for very little cost.  You can check with a commercial liability insurance provider to obtain a personalized quote for a policy that will match the needs of your business.

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