General liability vs. Errors and omissions insurance

General Liability Insurance Vs. Errors & Omissions Insurance: What’s The Difference?

Businesses need a whole host of different insurance policies to operate with sufficient coverage. Commercial property insurance, commercial auto insurance, and even business interruption insurance are typically well understood—but things get a bit trickier when it comes to liability insurance.


There are different types of liability insurance for businesses, and two of the most important are commercial general liability insurance (CGL insurance) and professional liability insurance—one type of which is errors and omissions insurance (E&O insurance).  


Let’s explore both types of insurance, what they’re used for, and whether or not you need them for your business. 

What Is Liability?

To understand liability insurance, you need to understand liability. Simply put, when a person is injured or their property is damaged due to the operations of your business, you may be found liable for that damage or injury—and this means you may have to pay for costs, including:


  • Repairing any damage
  • Replacing damaged property
  • Reimbursement for medical expenses
  • Compensation for pain and suffering
  • And more


When a liability policy pays out, it can cover these costs, as well as the legal fees involved in getting a case dismissed or going to court. For more information on liability, we recommend reading the Torts in Canada page of The Canadian Encyclopedia, especially the Torts of Negligence, Compensation, and Strict Liability sections. 

What Is General Liability Insurance?

Commercial general liability (CGL) insurance is the most common type of business liability policy. The coverage offered by CGL policies can vary significantly, but coverage will often include:


  • Injury or damage caused on your property—slip-and-trip accidents are a common claim on CGL policies in the Northwest Territories.
  • Accidents caused by business activities off-premises—a plumbing company that accidentally floods their client’s home might be covered by CGL.
  • Advertisements or claims that are considered slanderous or libellous—slander and libel are seen as personal injuries and may be covered under a CGL policy.


Commercial general liability policies are necessarily broad, but they don’t cover everything. Product defects, for example, may only have limited coverage under a CGL policy, and business owners may want to purchase additional product liability insurance to cover liability for products they’ve manufactured.


Notably, CGL policies don’t typically cover mistakes made by professionals like accountants, doctors, and lawyers. This is where professional liability insurance and errors and omissions policies come into play.

What Is Errors and Omissions Insurance?

Errors and omissions (E&O) insurance is a type of insurance used by professionals to cover losses incurred by their clients due to mistakes made by the professional. Here are some examples of when a policy might respond:


  • An accountant makes an inaccurate deduction leading to a financial loss for their client
  • A lawyer misses a filing deadline, and their client’s case is dismissed
  • An insurance agent does not provide sufficient coverage based on a needs analysis, and the client is underinsured in the event of a loss


These professional activities fall outside the scope of a CGL policy—you need an E&O policy to protect you, and many professionals are required to have an E&O policy as a condition of their employment. Like CGL policies, E&O policies may cover legal costs, as well as the cost of any settlements or judgements against the professional. 


Note that E&O policies are a type of professional liability insurance; the two terms are often used interchangeably. Another term, malpractice insurance, is typically reserved for medical professionals like doctors and dentists, though it, too, is professional liability insurance. 

Do I Need Liability Insurance?

We recommend liability insurance for all businesses. Liability claims can cost millions of dollars, and most liability insurance has limits to reflect this reality. Businesses can rarely afford the cost of ongoing legal fees, let alone the cost of settlements.


Looking for liability insurance for your business in the Northwest Territories? Make an appointment with an insurance broker at Nation North. We’ll help you find the perfect policy for your needs.