Errors And Omissions Insurance - E&O

AAA

DEFINITION of 'Errors And Omissions Insurance - E&O'

A professional liability insurance that protects companies and individuals against claims made by clients for inadequate work or negligent actions. Errors and omissions insurance often covers both court costs and any settlements up to the amount specified on the insurance contract.

INVESTOPEDIA EXPLAINS 'Errors And Omissions Insurance - E&O'

E&O insurance can be obtained by insurance brokers/dealers, registered investment advisors and financial planners, among others. It is often required by regulatory bodies such as FINRA or company investors.

In the financial industry, lawsuits will happen, regardless on how baseless the claims may be. Clients sometimes sue an advisor or broker after an investment goes sour, even if the risks were well known and within the guidelines established by the client. In these cases, even if a court or arbitration panel finds in favor of a broker or investment advisor, the legal fees can be very high and E&O insurance is vital in these situations. A person or company that has had numerous litigation problems has a higher underwriting risk and will find E&O insurance to be more expensive or less favorable in its terms as a result.

RELATED TERMS
  1. Honesty Bond

    A bond posted by an organization or professional insuring the ...
  2. Arbitration

    An informal hearing regarding a dispute. The dispute is judged ...
  3. Cooling-Off Rule

    A term referring to law pertaining to newly-entered contracts ...
  4. Liability

    A company's legal debts or obligations that arise during the ...
  5. Broker-Dealer

    A person or firm in the business of buying and selling securities, ...
  6. Financial Industry Regulatory Authority ...

    A regulatory body created after the merger of the National Association ...
Related Articles
  1. How does FINRA differ from the SEC?
    Investing

    How does FINRA differ from the SEC?

  2. Don't Get Sued: 5 Tips To Protect Your ...
    Entrepreneurship

    Don't Get Sued: 5 Tips To Protect Your ...

  3. Cover Your Company With Liability Insurance
    Home & Auto

    Cover Your Company With Liability Insurance

  4. Filling The Gaps In General Liability ...
    Home & Auto

    Filling The Gaps In General Liability ...

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center