Commercial lines
Professional Liability (E&O)
Claims that you gave bad advice or failed to deliver a professional service.
What it covers
- Errors, omissions, and negligent acts
- Defense costs
- Prior acts / retroactive date coverage
What people get wrong
Almost always claims-made. Letting the policy lapse can erase years of prior-acts coverage — ask about tail before you switch carriers.
Claims-made mechanics: retro dates, tails, and what counts as a claim
Professional liability responds to the allegation that your work was wrong: bad advice, a missed deadline, a design that did not perform, a service not delivered as promised. General liability will not touch any of that, because it is written for bodily injury and property damage. If your firm's product is judgement, this is the policy that stands between a dissatisfied client and your balance sheet.
Almost every E&O form is claims-made, which inverts the intuition people bring from other policies. Coverage depends on the claim being made against you and reported during the policy period, not on when the work was performed. Two dates therefore govern everything. The retroactive date is the earliest work the policy will respond to — anything before it is excluded no matter how long you have had coverage. The reporting requirement means a claim you learn about must be reported promptly, in the period it arose, or it may not be covered at all.
That structure makes lapses expensive in a way that is easy to miss. Switching carriers is usually fine if the new policy carries your original retroactive date forward, but letting coverage lapse for even a short window, or accepting a fresh retro date, can erase years of prior work from coverage. When you wind down or retire, an extended reporting period — a tail — keeps the door open for claims that arrive after the policy ends. Ask about tail pricing before you move, not after.
Two clauses to check. On many forms defence costs erode the limit, so a long fight consumes the money that would have settled the case; limits that look adequate can be thin once you account for that. And consent-to-settle provisions determine whether you can refuse a settlement you consider unjust — most have a hammer clause that caps the carrier's exposure if you insist on fighting. Also worth knowing: a claim is not only a lawsuit. A written demand, and in many forms an email holding you responsible, starts the clock.