When I first started researching contractor coverage, I thought general liability was the safety net for everything that could potentially go wrong. It turns out that’s not necessarily the case. Over the years, I’ve learned that general liability insurance helps cover third-party bodily injuries and third-party property damage, but usually not mistakes in the work itself.
Think about a remodeler who incorrectly measures materials and has to completely redo a kitchen, or an electrician who installs the wrong system. Without contractors’ errors and omissions insurance, those costs can fall on your business.
What This Endorsement Typically Is
Contractors’ errors and omissions (E&O) coverage is an endorsement you can add to your general liability policy. It may not always be a separate policy.
While general liability (GL) helps pay for third-party bodily injury or third-party property damage from faulty products, it doesn’t cover the cost of your own mistakes when completing work. That’s where E&O coverage can step in.
Errors and omissions coverage helps pay for financial losses caused by errors, omissions, or negligence in your work. That can include things like incorrect installations, design flaws, or faulty materials.
It’s important to note that subcontractors’ work isn’t typically covered under this endorsement, so you’ll still need to manage that risk separately.
Think of contractors’ E&O as a safeguard that strengthens your general liability protection. It closes a gap that many business owners don’t even realize they have. GL covers accidents around the job site, while E&O covers errors in the work itself — the kind of mistakes that can derail a project and drain your bottom line.
Why It Matters
Even the most experienced contractors can make mistakes. And when they do, those costs can add up quickly. Consider these examples:
- An HVAC contractor miscalculates load requirements, so the system doesn’t perform adequately and has to be replaced.
- A painter uses the wrong type of paint on a commercial project, forcing a complete and expensive redo.
- A landscaper installs an irrigation system incorrectly, causing flooding that damages a client’s property.
- A contractor misses a deadline which impacts the customer financially.
These aren’t the types of claims general liability usually can cover. Without errors and omissions coverage, you could be responsible for repair and replacement costs and potential lawsuits. Plus, it’s important to consider the reputational damage that can come with these situations. Word travels fast in contracting. While Contractors’ E&O insurance can’t prevent a mistake, it can help rectify a bad situation and minimize any harm to your good name.
What’s Covered vs. What’s Not
Contractors’ errors and omissions insurance is designed to help protect against the financial fallout from your professional mistakes. Here’s how it typically breaks down, depending on your policy:
Typically Covered:
- Damage to completed work caused by a contractor’s error
- Design miscalculations or professional negligence
- Use of defective or incorrect materials that require rework
- Legal defense costs, including attorney fees and settlements, that are tied to covered claims
- Failing to meet acceptable industry standards that leads to financial damages for the customer.
Not covered:
- Third-party bodily injury or third-party property damage (typically handled under general liability)
- Work performed by subcontractors
- Intentional acts, fraud, or dishonest practices
- Normal wear and tear, poor maintenance, or slow deterioration
Understanding this coverage can help you see where contractors’ E&O strengthens your protection and where you may still need additional coverage or risk management strategies.
Cost and Value
Compared to the expense of redoing an entire project or fighting a lawsuit, contractors’ errors and omissions coverage is often affordable. Premiums typically vary based on trade, location, and coverage limits.
But for many small businesses, this insurance can cost much less than a typical claim. For example, repair costs for contractor mistakes can easily reach several thousand dollars.
Beyond the numbers, this endorsement can deliver peace of mind. For contractors in trades where errors are common and costly — like HVAC, painting, or landscaping — E&O can help provide a safety net, preventing a setback from turning into a potentially serious financial problem.
How to Add It
You can typically add it as an endorsement to your existing general liability insurance. To start the process, contact your insurer or broker, provide information about your business, review the available limits, and request a quote.
Your insurer should be able to tailor the endorsement to match your trade and risk level. Whether you’re a remodeler, electrician, or landscaper, this add-on can be adjusted to fit your business needs.
It’s a simple, affordable step that can strengthen your protection and help ensure professional mistakes generally don’t leave you personally responsible for expensive claims.
Protect Your Business Before Mistakes Happen
Every contractor knows errors happen. But one mistake shouldn’t threaten your business’s future and reputation. Contractors’ errors and omissions coverage helps ensure that rework or legal claims don’t put you at risk financially.
Take the time to review your current policy, compare quotes, and speak with a licensed insurance professional to see if this endorsement might be right for you. With the right protection, you can focus on growing your business.