Your general liability policy does not cover bad advice.
General liability answers when something is damaged or someone is hurt. It does not answer when a client loses money because of what you told them to do. That is a different policy, and the discovery usually happens at the worst possible moment – when a client has already put it in writing.
Build the firm file The short answerInjury and property damage. Someone trips, something breaks
Financial loss caused by your work, advice or a missed step
A firm sells advice and carries only the first one
What does errors and omissions actually cover?
Financial loss a client suffers because of your professional work – a wrong recommendation, a missed deadline, an error in a report, something you should have flagged and did not. It covers the cost of defending the allegation as well, which matters because the defence usually starts long before anyone decides whether you were actually wrong.
It does not turn a disappointing outcome into an insured one. Cover responds to a mistake or an omission in the work. It does not respond to a client who is simply unhappy with a result you never guaranteed, and on most wordings it does not respond to a dispute about your own fees.
An allegation does not have to succeed to cost money. Defence begins immediately, and for a firm without the cover it comes straight off the balance sheet.
Which one answers depends on what went wrong.
A visitor trips in your office
General liability. Bodily injury on your premises, nothing to do with the quality of your advice.
Your recommendation costs a client six figures
Errors and omissions. No injury, nothing damaged, only money – and general liability is not written to answer for money lost this way.
Three things worth knowing before a client complains.
It is claims made
The policy that answers is the one in force when the claim arrives, not the one in force when the work was done. Let it lapse between contracts and the gap is retroactive, covering everything you have ever advised on.
Defence costs may sit inside the limit
On many wordings the legal bill comes out of the same pot as any settlement. A limit that satisfied the contract can be substantially used up before the merits are ever argued.
Promises in the proposal follow you
Guarantees of savings or outcomes written into a pitch can be read as a contractual promise rather than professional judgement. Insurers look at what was promised, and a policy is not a good place to discover you promised more than you meant to.
What consultants ask us about this.
My client is unhappy but has not sued. Do I tell my insurer?
Usually yes, and sooner rather than later. Most wordings require notice of circumstances that could give rise to a claim, and reporting late is one of the few ways a valid claim gets refused. Tell your broker before you reply to the client.
The contract asks for errors and omissions on an occurrence basis. Can I get that?
Rarely, because professional liability is written claims made almost everywhere. This clause turns up in contracts drafted from a construction template. It is usually resolved by explaining the market to the client, and it is far easier before signature.
We are a small firm with careful people. Is it really necessary?
Care reduces mistakes and does not reduce allegations. The cost that arrives first is defence, and it arrives whether or not the complaint has merit. Small firms feel that cost hardest because there is less balance sheet behind it.
Does it cover work our subcontractor did?
Sometimes, and it depends on the wording and on how the work was engaged. Firms that pass specialist work to associates should check this specifically rather than assume, because the client will come to whoever signed the contract.
We hold client data. Is that part of the same policy?
Not usually. A data breach is a different exposure with its own cover, and it brings reporting duties of its own. A firm holding client records typically needs both looked at together. Send us what you hold and we will tell you which parts are answered where.
Not the question you had? Build the firm file and set out your own situation in plain words. A licensed broker reads it and replies in writing.
Send us the insurance clause from your client contract.
We read what it actually requires, tell you where your current cover sits against it, and say plainly if it asks for something the market does not write. Next business day, and usually the same day.