What is Errors & Omissions Insurance?
E&O is a form of professional liability insurance that helps protect professional advice and service. It protects individuals and companies from bearing the full cost of defending against a negligence claim made by a client, and damages awarded in such a civil 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.
In the financial industry, lawsuits happen, regardless of how baseless the claims may be. Clients may try to sue an advisor or broker after an investment goes sour, even if the risks were well-known and within the guidelines established by the client. In these cases, even if a court or arbitration panel finds in favor of a broker or investment advisor, the legal fees can be very high, and E&O insurance is vital in these situations.