What Are the Limitations of a Typical E&O Policy?

Many professionals view Errors & Omissions insurance, or professional liability insurance, as an essential form of protection against both valid and unsubstantiated claims. However, some professionals may still be exposed to liability because they have a poor understanding of what an E&O policy covers. Professionals should remember that, in most cases, these policies do not protect against the following things.

 

Intentional Misconduct

 

If a policyholder engages in fraud, crime, or other wrongful acts, resulting claims are not covered under a professional liability policy. This exemption can be problematic for professionals with partners. Even professionals who trust their partners may want to speak with an insurance agent about Innocent Insured Coverage, which protects policyholders who were unaware of the wrongful acts of other policyholders.

 

Injury and Property Damage

 

Typically, any injury or property damage clients suffer is excluded from E&O coverage. There is an exception for professionals whose work involves a high risk of these errors, such as medical professionals. Other professionals will need to pursue additional insurance coverage to mitigate this risk.

 

Punitive Damages

 

Finally, most professional liability policies do not cover punitive damages. Usually, though, these damages are only awarded for gross professional misconduct, which means competent and conscientious professionals should not face a high risk of paying punitive damages.

 

Bridging the Gap

 

Any professional with an E&O policy should work with an insurance agent to understand the policy limitations and potential remedies. In most cases, policy additions such as Innocent Insured Coverage or complementary policies such as General Liability can help a professional overcome any limitations of his or her existing policy.