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How Errors and Omissions Insurance Protects Small Business in Texas

Every service-base small business owner in Texas understands how difficult it is to predict the future. While you strive to make good decision, and provide sound advice for clients, sometimes mistakes will be made, or information will be taken out of context by the client. If mistakes are made or injuries occur that results in financial loss, a client may take legal action by filing civil litigation.

Errors and Omissions insurance helps to provide financial backing to companies who face potential legal problems based on the information or services they provide their customers. Being protected by Errors and Omissions Insurance in Texas provides these business owners the peace of mind, knowing they are protected and will have the resources available to defend their honor, business, and good name – without skipping a beat of normal business activities.

In this article, we’ll take time to break down the facts about Errors and Omissions insurance. We’ll explain how this insurance policy works, what’s covered and not covered, along with providing a few examples on how it can help any sized business owner.

What is Errors and Omissions Insurance in Texas

The US Small Business Administration estimates that nearly 2.6 million small businesses are active in the State of Texas. This represents 99.8 percent of all licensed businesses that operate in the state. To say that small business has an impact on the state’s economic stability would be an understatement. Those businesses who offer professional advice or service to customers charge their clients a premium for their experience, education, and knowledge. While they are experts in their industry, sometimes the most experienced service business owner makes mistakes.

Errors and Omission Insurance is also referred to as Professional Liability Insurance. It’s a customized insurance policy that protects small businesses in Texas against a third-party lawsuit made by clients or customers due to professional errors or negligence.

For example, if you operate an architectural firm, and provide a client with plans that are faulty, lead to additional construction costs to fix mistakes, or cause physical injury – a client may file a civil lawsuit to recoup damages. If this all-too-common issue happens, Errors and Omissions Insurance will provide you with the financial support to retain legal professionals, cover court costs, and permit your business to defend itself without compromising your daily activities or serving other clients.

What does Errors and Omissions Insurance Cover for Texas Small Businesses?

There are several legal and financial areas of support that are provided to business owners who establish and Errors and Omissions insurance policy. If your business is licensed in Texas, the coverage will provide financial support for alleged or actual negligence. It also covers legal and defense expenses including the following:

  • Legal Costs: When a small business in Dallas, Houston, or other Texas city is accused of providing faulty data or professional misconduct, possible civil litigation may be filed by your customer. Errors and Omissions Insurance will permit you to hire the best legal team, so you can begin your defense without delay.
  • Settlements: Quite often, issues can be resolved by clarifying communication, or settling the disagreement out of court. Errors and Omissions Insurance can cover settlement costs up to a predetermined amount based on the level of coverage.
  • Court Expenses: While several civil claims are settled outside of court, there are times when the legal system will need to determine if the claim is valid. There are court fees and expenses that are usually deferred to the losing party of a civil lawsuit. If your business is on the wrong end of the judgement, you may have to pay these costs including underwriting, administration, and filing fees.
  • Judgement: If the court determines that your business is at fault, a financial judgement may be awarded to your client. This can range from thousand to millions of dollars. Errors and Omissions Insurance will provide financial support to cover some or all of the judgement expenses based on the limits of the policy.

What is Not Covered with Error and Omissions Insurance?

There are a few items that are not covered with Error and Omissions insurance such as:

  • Illegal acts completed by the business or individuals working for the entity
  • Intentional malpractice or fraudulent acts
  • Acts of dishonesty
  • Property damage

What Type of Texas Businesses Needs Errors and Omissions Insurance?

If you operate any business that offers advice, recommendations, or solutions to customers in Texas that are based on your expertise, you can benefit from Errors and Omissions Insurance. In many instances, the claim is not legally legitimate, however, damage can occur simply based on accusation. When you have Errors and Omissions insurance, your ability to defend yourself with legal council is enhanced.

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

Home Care Providers

When you operate a home-based or onsite healthcare service, mistakes outside of your control can happen quickly. It’s also common for a home healthcare business to have multiple employees or contractors that operate under the business umbrella. An Errors and Omissions Insurance policy can be customized to cover these individuals as well as the business entity itself.


An Accountant specializes in providing expert financial advice to clients ranging from individuals to large corporations. If mistakes or errors are made that impact a client financial or tax liability, they can be held financially liable. Errors and Omissions Insurance gives accountant’s peace of mind, knowing they can continue with business while potential legal issues are resolved.


The consultant is hired specifically for their expertise in a service or industry. While they are usually independent contractors, they are still subject to claims filed by a client.

How much does Errors and Omissions Insurance Cost in Texas?

Like any other insurance policy, the cost of coverage is dependent on multiple variables. Some of the most common items that can increase or reduce the cost of your policy include the amount of coverage requested, the size of your deductible, the type of business you operate, how many employees are covered, and the range of protection services. Other items such as previous insurance claim history, credit rating, and the preference of the insurance carrier can also impact how much you’ll pay for this insurance policy in Texas.

Obtaining Errors and Omissions Insurance in Texas is not only a smart financial investment, it offers small business owners the peace of mind. It permits your small business to continue with business as potential litigation is handled by experts. It is scalable, can be customized, and optimized for any business size and scope.

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