Professional liability insurance is most commonly known as errors & omissions insurance (E&O). It is a type of liability insurance policy that helps protect service and advice professionals and companies from the full cost of defending against a negligence claim made by a client, and damages awarded in such a lawsuit.
The coverage focuses on alleged failure to perform on the part of, financial loss caused by, and error or omission in the service or product sold by the policyholder. These are potential causes for legal action that would not be covered by a more general liability insurance policy which addresses more direct forms of harm. Professional liability coverage can also provide for the defense costs, including when legal action turns out to be groundless.
Professional liability insurance is required by law in some areas for certain kinds of professional practice (especially medical and legal), and is also sometimes required under contract by other businesses that are the beneficiaries of the advice or service.
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