Errors and omissions (E&O) insurance in New Jersey

Sole proprietors, startups, and corporations in the tech industry rely on E&O insurance to protect against lawsuits from dissatisfied clients.

Tech professionals often buy this coverage together with cyber insurance in a package called technology errors and omissions insurance, or tech E&O. This bundle helps pay for lawsuits related to data breaches and cyberattacks.

Examples of situations where technology professionals may need E&O coverage include:

• An IT consultant recommends insecure software that leads to a data breach on a client's system.
• A cloud computing provider suffers an unexpected outage that suspends a client's ability to do business.
• A computer repair business fails to fix a client's computer in time for them to complete an important project.

Businesses that provide professional services carry E&O insurance to cover financial losses in case a client isn't satisfied with their work.

Examples of situations where professionals may need E&O coverage include:

• An event planner fails to book a venue they'd guaranteed for a client's wedding.
• A security guard overlooks a threat and someone vandalizes their client's property.
• A recruiter makes a typo in a job listing and candidates expect a higher salary and different benefits.

When a construction company makes a mistake, the results can be devastating. That's why E&O insurance is common in construction. Here, you're more likely to see it called professional liability coverage.

Examples of situations where construction professionals may need E&O coverage include:

• An electrician installs faulty wiring, which causes a fire that damages a client's home.
• A painter fails to complete a project on time and a store is forced to delay its grand opening.
• A general contractor doesn't comply with building codes, forcing the homeowner to complete a costly renovation on an outbuilding.

State laws sometimes require physicians, especially those with admitting privileges, to carry medical malpractice insurance.

In New Jersey, physicians and podiatrists must carry $1,000,000 per occurrence and $3,000,000 per policy year (including tail coverage) if they have patient care responsibilities. Other healthcare workers, including nurse practitioners and certified nursing assistants, are not required to carry this policy.

Healthcare professionals often need this coverage in order to work at hospitals and other healthcare facilities, and to participate in health networks.

Examples of situations where healthcare professionals may need E&O coverage include:

• A registered nurse accidentally gives the wrong dose of medication to a patient, who suffers an adverse reaction.
• A home health aide misses an appointment and their client is alone when they suffer a medical crisis.
• A chiropractor makes an improper adjustment that worsens a client's back pain.

Agents and brokers in both the insurance and real estate industries rely on errors and omissions insurance, partly because their work can significantly affect clients' finances. States also sometimes mandate coverage, though it's not required in New Jersey.

Home inspectors, however, are required to carry at least $500,000 per occurrence E&O coverage and register proof of coverage with the state board before they can operate in New Jersey.

Examples of situations where agents and professionals may need E&O coverage include:

• A real estate agent makes a mistake in an MLS listing, and the buyer discovers the property was smaller than advertised after they've finalized the purchase.
• An insurance agent fails to protect a client against risks they thought they were covered for, but they didn't find out until a flood swamped their property.
• A claims adjuster is sued for denying a valid claim because they accidentally looked at a neighboring property instead of the policyholder's home.

In New Jersey, lawyers are not required to carry malpractice coverage. However, limited liability firms must carry $100,000 malpractice coverage per attorney.

Malpractice insurance is crucial for working at a law firm and demonstrating that your business is reliable.

Examples of situations where legal professionals may need E&O coverage include:

• A law firm misses a deadline to submit paperwork to the court on behalf of a client.
• An attorney fails to obtain a client's consent before making an important decision for them.
• A legal assistant misplaces a key document that was needed for a client's case.

General liability insurance does not typically include errors and omissions coverage, though it's possible to buy these coverages together in some industries.

These two policies protect against different kinds of risks, which is why small business owners often carry both types of insurance coverage.

• General liability insurance covers accidents that harm someone outside your business, such as a customer who slips in your office and suffers a concussion, or an incident where an employee drops and breaks a client's laptop. It also covers advertising injuries, such as copyright infringement, libel, and slander.
• Errors and omissions insurance pays for legal costs when your business is accused of a negligent act that harmed a client financially. In the case of medical malpractice insurance, this can extend to bodily injuries as well, as physical health is part of a healthcare provider's professional responsibilities.

General liability claims can happen at any business, especially those that are open to the public. E&O insurance is more specific to businesses that offer professional services or advice, especially in areas where a mistake could cause a client to lose money.

Read more about errors and omissions insurance vs. general liability insurance.