Errors and Omissions Coverage - Why Contractors Need It

As a former contractor who worked in the construction industry for nearly 40 years, I’ve learned that managing risk is critical in all business areas. Every contractor is unique, and their insurance policies should be customized accordingly, highlighting the importance of choosing an insurance carrier with a deep understanding of the construction industry.

Currently, over 70,000 contractors trust Acuity with their insurance needs, and Contractors Errors and Omissions is one of the specialized coverages we offer.

What is Errors and Omissions (E&O) coverage?

Contractors E&O Specialized Coverage

Contractors E&O coverage protects professionals and businesses from claims of:

• Negligence

• Mistakes

• Failures in the services

Even a seasoned contractor can make mistakes, and E&O coverage is an extra layer of protection when an error happens. If a client claims that your work contained an error or omission resulting in financial loss or damages, E&O insurance can help cover the legal costs and any settlements or judgments that may arise. It also covers recall expenses, which are costs associated with recalling and correcting products or services that are defective or flawed due to errors or omissions on your part. However, recall expenses are only covered if they result from property damage to your product or work or any part thereof. E&O coverage is applicable after the completion of the job.

Contractors E&O coverage is a claims-made policy that covers claims made during the policy period, regardless of when the alleged error occurred.

Let’s look at a few scenarios where errors and omissions coverage could be applied:

Scenario 1 (Painting Contractor)

The insured painting contractor was hired to stain the interior doors, trim, and millwork for a new home at the contractor’s shop. The homeowner approved the stain colors to match. Once the materials were delivered to the job site, the stain on the doors did not match the rest of the woodwork. The doors needed to be replaced and stained with the appropriate color, which cost nearly $50,000.

Scenario 2 (Concrete Contractor)

The insured concrete contractor was hired to pour decorative concrete around a backyard pool, patio, and fire pit. The concrete started cracking a couple months later and was replaced at a cost of over $26,000.

Scenario 3 (General Contractor)

A driveway with radiant heat needed to be redone. The general contractor claimed the radiant heat system was damaged when the insured poured the concrete. The only way to access the radiant heat system was to break the concrete, so the insured had to repour the concrete, which cost over $68,000.

Scenario 4 (General Contractor)

The insured contractor installed a bar countertop. The customer noticed that the countertop had started to delaminate along the edges. It was determined this happened due to product failure because the sealer caused the countertop to delaminate. The insured had to replace it, which cost over $14,000.

In all of the above scenarios, E&O coverage would likely cover the costs where the issues resulted from errors or omissions in professional services provided. However, coverage specifics can vary based on the policy terms and the nature of the error or omission, so reviewing the actual policy and consulting with the insurer would provide definitive answers.

As it becomes more difficult for contractors to obtain well-seasoned and experienced tradespeople, adding E&O coverage to your insurance policy can add another layer of crucial risk protection for your business.

For more information on Acuity’s Errors and Omissions coverage, visit Acuity.com or contact your independent insurance agent today.