Professional liability or E&O Insurance is often required for contractors that advise, design or propose work for end clients. As an insurance broker I am required to carry E&O Insurance as I am providing financial advice to clients. As we will explore, examples like this are more common than you may think.

When you provide a service versus a product, the advice you give can ultimately spark a lawsuit. If an error or omission results in damage or financial harm to the end user you could find yourself in hot water. If I advise someone that they indeed have coverage and a claim is not covered, who is to blame? The insurance carrier will not pick up the claim and I’ve made a written or verbal statement to a client that indeed they would have coverage in an event like this. The client can then sue a broker for the loss. If it is proven they suffered financial harm due to my guidance my E&O policy would respond. 

Hence, if you are making claims, quotes, statements, advising or even providing oral or written documents about your services then we should chat further. This is because professional liability insurance is in many cases inexpensive for the value provided.

How much does E&O coverage cost? This can range dramatically depending on the business type, amount of customers served (revenue annually) and experience and history you have. All of these factors help paint a picture of risk, coverages and wordings needed to provide the best value. We have had businesses insure the professional liability side for as low as $500/annually and some range in the hundreds of thousands of dollars annually. For a low risk, single operation we can expect low premiums and for a multi-national engineering risk we could expect much higher premiums. This is why it’s important to chat with an insurance broker for some advice first when setting up a business or reviewing your business annually. Like many types of insurance, starting early and reviewing often can lead to better value in the long run.

We often see contractors come to us asking for professional liability or E&O insurance for the first time. This may be because they’ve worked as employees prior and are now acting as a contractor. They would now need insurance as the main company would likely have E&O coverage for employees but not for non-employees (contractors). As you are choosing to provide services on a contractor basis, you present an exposure for the company. You could think about this like being part of a group benefit plan for health, dental and other coverages when an employee. Once you exit the employee designation your coverage typically on the main plan would end. Also for entrepreneurs starting from the bottom, it pays to insure early.

Many companies make it a contractual obligation for contractors to carry their own professional liability. They can also ask for other coverages and conditions to be met like commercial general liability, cyber insurance and more. When being asked for coverages, the limits can range from $1 million liability, $2 million liability, $5 million liability or even higher.

If you already have the most common type of business insurance which is CGL or commercial general liability insurance, this will not cover you for many aspects of your business. A CGL insurance policy kicks in when there is property damage or bodily injury damage. It has clear exclusions and or omits coverage for financial harm resulting for bad consulting as outlined above. Review your current policy with a broker today to get an exact picture of what you have and what you may really need.

We have more content around different types of insurance or how to do a review of your coverage now. If you are ready to chat with a broker like James, please book a call here or fill out a quick form so he has an idea prior to the meet. Both are great options and free of charge. Brokers are paid commissions on policies should you purchase a product. I work through a fully independent brokerage in Ontario, Canada. Our advice is always objective and we have no other external partners like insurance carriers or banks. Let’s chat today.