Professional Liability vs. Contractor’s Errors & Omissions: Explained

By: Matt Meyer, Senior Sales Executive / Risk Advisory Solutions, Construction Practice

Defining the purpose of both errors & omissions and professional liability coverage in terms of how they apply to contractors is essential to understanding their differences!

First, professional liability:  This coverage is meant for general, design-build contractors and construction managers who have design professionals on staff or who subcontract design services to others.  

And second, contractor’s E&O:  This is designed for artisan and specialty contractors seeking coverage for errors and omissions in their work that cause damage to, loss of use or recall of their work, installed products, and/or impaired property.  

These two terms frequently used interchangeably, but the policies do have some distinct differences.  

Some examples of the key differences:

1. The definition of a “wrongful act,” which is a key term and will determine how the policy will respond.
2. How the policy may or may not respond to faulty work. 
3. If there was an error, would the policy allow for you to correct the work before it damages a third party?  That is known as rectification coverage.  

Whether you’re a design-build firm or a trade contractor, understanding the differences in these coverages is crucial!  If you get it wrong, it can cost hundreds of thousands of dollars if not more.  

Have you ever considered developing a process to identify how to drive down costs, workload, and risk? Do you know that all these aspects of your business (costs, workload, and risk) are intertwined by your understanding the differences between coverages, such as contractor’s E&O and Professional Liability?  

If you would like to explore this topic further, please don’t hesitate to contact a Horton representative today.