In Plain English
Quick Answer
Insurance that covers professionals if they make a mistake in their design or advice that causes financial loss.
Definition
Definition
Errors and omissions insurance, also called professional liability insurance, protects design professionals and contractors against claims of negligence, mistakes, or failures to perform professional duties. In construction, E&O is carried by architects, engineers, and design-build contractors to cover claims arising from faulty designs or specifications. Unlike CGL, E&O covers financial harm resulting from professional errors rather than physical property damage.
Context
Why It Matters in Bidding
E&O coverage is a bid-qualification gate on design-build and EPC work, where the contractor assumes design liability that a standard CGL policy specifically excludes. Owners increasingly name required E&O limits in the instructions to bidders, so a contractor without the right professional policy can be ruled nonresponsive even with the low price.
Example
Example
A design-build GC bidding a wastewater upgrade confirms its engineer of record carries E&O at the owner-required $2 million limit and adds the premium for project-specific professional liability into its general conditions before submitting.
See Also
Related Terms
FAQ
Questions Contractors Ask
Does a general contractor need errors and omissions insurance?
A traditional design-bid-build GC usually does not, because it builds to someone else's design and carries CGL for physical damage. A design-build or EPC contractor that takes on design responsibility generally does need E&O, since claims of faulty design or specification fall outside what general liability will pay.
What is the difference between E&O and general liability in construction?
General liability responds to bodily injury and physical property damage from construction operations. E&O responds to purely financial losses caused by professional mistakes, such as a design error forcing costly rework. A defective drawing claim with no physical damage typically triggers E&O, not the CGL policy.
How does E&O affect the bid price?
Design-build proposals must fold the professional liability premium and any project-specific policy cost into general conditions or markup. Higher owner-mandated limits raise the premium, so estimators confirm required limits in the instructions to bidders early to avoid carrying an inadequate number that gets the bid disqualified.
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