If you provide B2B services, it’s not unlikely a client will someday ask the question, “Can you add me to your Errors & Omissions (E&O) Insurance policy?” It’s happened to real estate brokers, financial planners, and even insurance professionals. And the best answer is probably no. Here’s why.
E&O coverage is a type of liability insurance. It protects you if you become legally liable in a situation where a client is harmed in some way due to the service you provide. This includes negligence, misrepresentation, violation of good faith and fair dealing, and inaccurate advice. None of this is covered by general liability insurance.
Sharing your E&O
Your E&O policy will typically cover court costs and settlements up to the amount detailed in the policy. You need it. But when you act on behalf of another company, that company may also be affected by your actions. And sued. So, should you make that company an Additional Insured (AI) so it will be covered under your policy?
There are good reasons why not:
- The contract may not allow the third party to be added as an AI.
- As E&O policies are industry-specific, the AI’s operations may differ from yours, so it’s hard to cover both in the same policy. The coverage may not be relevant to the AI’s needs.
- If the AI decides to sue yo but is on the same policy, its suit will likely fall under an insured vs. insured exclusion clause. And the insurer may not cover either of you.