Common Errors & Omissions Claims

When you own a small business that offers advice or services, there’s always a risk of lawsuits due to errors and omissions. Even if you have done your job to the best of your ability, something can still go wrong. Sometimes customers just aren’t happy with your work, and they could decide to sue your business. However, a lot of errors and omissions (E&O) claims can be resolved before they become costly lawsuits. In order to prevent, or quickly resolve, any errors and omissions claims made against your business, you have to know what to expect. Here are the most common errors and omissions claims:

piece pf paper that says contract on it torn in half
Breaking your contract can result in your customer losing money, in which they can sure you for.

Breach of Contract

If you have a verbal or written contract with a customer, you have to adhere to that contract. If a customer suffers any financial loss due to a breach of contract on your part, they can sue to recover their financial loss. For example, if you missed a deadline to put up a website for a company you’re under contract with, they can sue you for any money that they are losing while the site isn’t up and running. The types of breach of contract include:

  • Anticipatory breach– a business tells the customer that they will not be fulfilling the terms of their contract
  • Minor breach– a business fails to live up to a small detail in the contract.
  • Material or fundamental breach– a breach that is extreme enough to nullify the contract completely.


One of the biggest mistakes that businesses can make is overstating their expertise, promising their clients something they cannot deliver, or not fully disclosing information. If your company misrepresents itself or doesn’t disclose information, resulting in financial or reputational loss to the customer, then you can expect a lawsuit to follow. The lawsuit will be labeled as intentional or fraudulent misrepresentation. For example, if a car dealer lies about the history of a used car and their customer later finds out their car was in an accident, this would be considered fraudulent misrepresentation.

different colored signs that says lying on them
If you lie or even partially lie, then you can be sued for misrepresentation.

If you’re not careful, you can be slapped with a lawsuit, no matter whether you have intentionally or unintentionally misrepresented your company. E&O misrepresentation claims can include:

  • Making a statement that is partially true.
  • Making a statement that is completely false.
  • Omitting details, or failing to disclose important information.


Claims of negligence often occur when a business’ poor oversight leads to financial or even physical injury of another party. You could also be considered negligent if you communicate poorly with your customer, or if you fail to take reasonable care or control when providing your services. Even if you fully explain your prices and expected outcomes, a customer might form unrealistic expectations for your work. If you don’t meet their expectations, they might sue you. 

Protecting Your Business

In order to protect your business, you should:

  • Create a detailed contract that both parties review and sign before work begins. Include expectations about deadlines, payments and any other agreed-upon expectations between you and the customer. 
  • Make sure that you document everything that you’re doing so that you can prove you are getting the work done. two hands shking with words of cooperating and communicating in them
  • Always keep an open communication with your clients, especially if something goes wrong while you are under contract, or if there is a minor glitch. Prioritize honesty and transparency with your customers and let them know if you are going to miss a deadline, so you can manage expectations and work together to solve the problem.

Errors and omissions insurance is the best way to protect your company from a lawsuit and reduce the risk of losing your business because of a mistake. If you are sued, E&O insurance will pay  your legal costs such as attorney’s fees, court fees, and settlement costs. As long as your policy is active at the time of the incident, you will be protected. You do not want to wait until something happens in order to be insured. Make sure that your business is fully protected in the event of an incident by speaking to an EZ agent. To find an affordable plan that gets you the most coverage with the most savings, enter your zip code in the bar above, or to speak directly to a licensed agent in your area, call 888-615-4893.

About The Author:
Cassandra Love

With over a decade of helpful content experience Cassandra has dedicated her career to making sure people have access to relevant, easy to understand, and valuable information. After realizing a huge knowledge gap Cassandra spent years researching and working with health insurance companies to create accessible guides and articles to walk anyone through every aspect of the insurance process.

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