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Breaking Down the Facts About California Errors and Omissions Insurance

Every business strives to deliver factual and accurate information or services, however, sometimes mistakes could happen when you deliver your services. It’s for these rare situations where protection offered by Errors and Omissions Insurance (aka Professional Liability insurance) helps service-based businesses maintain peace of mind, and the confidence to power forward in the event of business errors.

In the information below, we will explain the facts about Errors and Omissions Insurance, and how it helps to protect business owners in California that operate companies with less than 500 employees. We’ll include what it covers, the type of businesses that should consider this type of policy, and a few facts that impact the costs of this critical insurance protection policy.

The Growth of Small Businesses in California

Small businesses are expanding quicker than ever before. In fact, according to the United States Small Business Administration’s Office of Advocacy, prior to the start of 2019, there are currently four million active small businesses located in California alone. Small business accounts for a large majority of all companies in The Golden State, with more than 99 percent of registered businesses being owned by entrepreneurs with fewer than 500 employees.

Regardless of the type of business or service provided, there is always a potential for errors or omissions to flow to the customer. When these mistakes happen, it can cause an individual or business to make poor decisions, which may impact their financial situation or potentially cause physical harm.

The inclusion of Errors and Omissions Insurance helps a small business in California protect itself from potential legal actions, lawsuits, and more. This type of insurance is commonly referred to as Professional Liability Insurance as well and is intended primarily to protect a business’s financial standing.

What does Errors and Omissions Insurance Cover for California Businesses?

Errors and Omissions insurance covers a wide range of financial and legal duties for businesses operated or registered in California, that are enacted upon pending litigation or lawsuits. Like any other insurance policy, the amounts of protection are customized based on the specific terms of the insurance contract.

When a small business in Sacramento, Irvine, or other California city makes the smart and proactive decision to cover itself with Errors and Omissions Insurance, it helps to offset costs in the following areas:

  • Legal Expenses: If your business has been accused of professional misconduct or providing inaccurate information, it’s possible that civil litigation will be pending. The defense begins by retaining an attorney. Since hiring a good lawyer is expensive, and it’s crucial to begin your defense quickly, it’s important to hire a good attorney. These expenses can be offset by setting up an errors and omissions insurance policy.
  • Court Fees: In the event that your lawsuit is filed in the court of law, it’s possible that the fees associated with court expenses will be the responsibility of the defendant. Expenses such as administration costs, underwriting fees, and other court fees are protected by this type of insurance policy.
  • Settlement: In some cases, in order to stay out of court, a settlement will be agreed upon between the two parties. This not only saves both parties time and money, but often resolves the conflict quickly. Many settlement fees are covered by Errors and Omission Insurance.
  • Judgement: If your court case heads to court and you are determined to be at fault, a judgement of financial expenses will likely be leveled against your small business. To ensure your business is not in default of a court order, the judgement fees must be paid.

What Type of Business in California needs Errors and Omissions Insurance?

The majority of businesses in California that benefit from Errors and Omissions Insurance are those who provide their clients with recommendations, advice, or solutions based on their experience in a particular field of study. Even if the claim against you is baseless, you’ll need to have legal representation in order to allow your business to continue with operations, while the dispute is handled through the legal process.

There are several professions who can benefit from Errors and Omissions Insurance including:


An architect is responsible for creating plans with developing buildings, bridges, and other infrastructure, commercial, or residential properties. If the information they provide leads to construction-related problems, or if damage or injuries occur based on their input, they can be held liable for damages. Errors and Omissions Insurance helps provide them the peace of mind knowing that if mistakes occur, they will have the financial flexibility to retain the right legal team.

Personal Trainers

Those who provide physical training advice or services can also be held liable for faulty information or advice was given to customers or clients. Whether it’s recommending a particular training regime that results in injuries, or other faulty data, having the protection of Errors and Omission Insurance allows them to continue with business operations.


A consultant by definition is one that is hired for their experience and education with a particular industry or task. They operate as independent contractors in some cases but can also be accused of professional misconduct or faulty data and recommendations for their clients.

What is Covered and What is Not Covered with Errors and Omissions Insurance?

In most instances, most E & O insurance policies are built to cover all of the employees of a company along with the small business itself. It can also be extended to cover independent contractors hired by the company or even part-time or volunteer employees. However, if a company is convicted in criminal prosecution, or items covered by other insurance policy types such as bodily injury or property damage), proven fraudulent acts, or acts that are outside of the business scope of focus may also not be covered.

How much does Errors and Omissions Insurance Cost in California

The average cost of Errors and Omissions Insurance in the State of California is roughly $773 per year. This of course, will mainly depend on the business size, the nature of the business, the level of insurance protection requested, your history of previous insurance claims, your requested deductible, and other traditional insurance terms.

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