The Oklahoma Contractor’s Guide to Contractor's E&O Insurance

Introduction: What Is Errors & Omissions (E&O) and Why Should You Care?

When you think about insurance as an Oklahoma contractor, you probably picture the big, obvious risks on a job site. A ladder falls, someone gets hurt, or your truck gets broken into. That’s what your General Liability policy is for, and it’s essential.

But what about the mistakes that aren’t so obvious? The ones that don't involve a physical accident but still cost your client a ton of money? We're talking about things like faulty work, bad advice, or an accidental design flaw.

That’s where Errors & Omissions (E&O) insurance comes in. Think of it as "bad workmanship insurance." It’s designed to protect you when a client claims your professional mistake cost them financially. This guide will break down what E&O is, why it matters on Oklahoma job sites, and how to avoid common, costly pitfalls.

Why It Matters for Oklahoma Contractors

A small mistake in your work can create a huge financial mess. It can cause project delays, force expensive tear-outs and re-dos, and even lead to a lawsuit from an unhappy client. E&O insurance is your financial backstop for these exact situations.

Let's look at some real-world examples for different trades:

For the HVAC Pro: Imagine you install a new commercial AC unit, but the roof support you built isn't quite right. The unit eventually falls through the roof. Your General Liability will cover the damage to the building, but it won't pay to replace your own work, the expensive AC unit. E&O is designed to fill that gap.
For the Electrician: You wire a new hotel, but a mistake causes the heat to fail in several rooms for two days during a big event. The hotel owner sues you for the lost room revenue. That’s a pure financial loss, and it’s a classic E&O claim.
For the Plumber: You connect two different types of metal pipes without the right fitting. Over time, corrosion ruins the entire system you installed. Your General Liability won't cover the cost to replace your own faulty work. An E&O policy would.

Even if you do everything perfectly, a client with unrealistic expectations can still sue, claiming you were negligent. E&O insurance helps cover your legal defense costs, whether the claim has merit or not.

What It Covers (and What It Doesn’t)

The biggest point of confusion for contractors is the difference between E&O and General Liability (GL). Getting this right is key to protecting your business. They are designed to work together, not overlap.

Here’s a simple way to think about it:

General Liability (GL) is for "Accidents & Injuries." It covers bodily injury and damage to other people's property.
Errors & Omissions (E&O) is for "Bad Workmanship & Bad Advice." It covers a client's financial loss because of your professional mistakes.

The Big Difference: The "Your Work" Exclusion

Your General Liability policy has a major exclusion for "your work." This means it won't pay to fix or redo your own faulty installation.

If a roofer’s bad install leads to a leak that ruins a client’s ceiling and furniture, GL pays for the ceiling and furniture. It will not pay for the roofer to tear off and redo the roof correctly. Only an E&O policy is built to cover that cost.

What E&O Typically Covers:

Faulty Workmanship: The cost to repair or replace your own incorrect work after a project is finished.
Errors in Design: Protects you if you provide design services (even informal ones) and a flaw causes a financial loss.
Defective Materials: Covers damages if materials you installed are later found to be faulty.
Professional Negligence: A broad category for mistakes, oversights, or providing inaccurate advice that costs your client money.

What E&O Does NOT Cover:

Bodily Injury and Property Damage: This is what your General Liability policy is for.
Employee Injuries: This is covered by Workers’ Compensation insurance.
Intentional or Fraudulent Acts: E&O is for mistakes, not deliberate wrongdoing.
Pollution: You typically need a separate Contractors Pollution Liability (CPL) policy for these risks.

Who Needs It and When?

The more you advise, design, or manage, the more you need E&O. If your job involves more than just following a blueprint, you have a professional risk.

You should strongly consider E&O if you perform any of these high-risk activities:

Design-Build Work: If you have any role in the design process, you have a direct liability exposure.
Giving Advice: Recommending specific materials, systems, or project plans is a professional service. If that advice turns out to be wrong, you can be held liable.
Project Management: Supervising subs, managing timelines, and quality control are all professional services that carry risk.
Value Engineering: Suggesting changes to plans to save a client money is a great service, but it also transfers risk to you if the changes cause problems.

Often, the choice isn't yours. Many clients and general contractors will require you to carry E&O insurance before you can even bid on a job. Having it already in place makes you look more professional and allows you to compete for bigger, better projects.

Oklahoma-Specific Insights

Let's bring it home to Oklahoma. It's crucial to know what the state requires versus what you actually need to be protected.

What the State of Oklahoma Requires

The Oklahoma Construction Industries Board (CIB) sets the minimum insurance needed to hold a license. These are just the basics to operate legally.

For Electrical, Mechanical, and Plumbing contractors, the CIB requires a $5,000 bond and at least $50,000 in general liability insurance.
For Commercial Roofing contractors, the requirement is much higher at $1,000,000 in general liability insurance.
Workers' Comp is required if you have one or more employees.

What the State Doesn't Require

Here’s the important part: the Oklahoma CIB does not require you to carry Errors & Omissions insurance.

This creates a dangerous "compliance vs. protection" trap. You can follow every state rule perfectly and still be totally exposed to a lawsuit over faulty work. The need for E&O in Oklahoma is driven by smart business practice and client contracts, not state law. Don't assume that meeting the state minimums means your business is fully protected.

Mistakes to Avoid

Getting an E&O policy is the first step. Avoiding these common mistakes is the next.

Assuming Your GL Policy Covers You. This is the biggest mistake. General Liability and E&O cover completely different things. Relying on your GL policy for a workmanship claim is a recipe for disaster.
Letting Your "Claims-Made" Policy Lapse. E&O policies are "claims-made," meaning the policy must be active when the claim is filed, not when you did the work. If you retire and cancel your policy, a claim for a job you did three years ago won't be covered.
Not Documenting Everything. Good paperwork is your best friend in a claim. Document client conversations, scope changes, and especially change orders in writing. It can be the difference between a quick dismissal and a huge settlement.
Not Checking Your Subs' Insurance. If you hire a sub, you can be held responsible for their mistakes. Always require them to carry their own E&O insurance and get a certificate of insurance as proof.
Buying the Cheapest Policy Without Reading It. Not all E&O policies are the same. A cheap policy might have exclusions that leave your main services unprotected. Work with an agent who understands construction to find a policy that fits your actual risks.

Frequently Asked Questions

1. Is "Errors & Omissions" the same as "Professional Liability" insurance?

Yes. For contractors, the terms are used interchangeably. They both refer to coverage for financial loss caused by your professional mistakes.

2. How much E&O coverage do I need?

It depends on the size of your projects and what your contracts require. A common starting point is $1 million per claim, but you should talk to your agent to figure out the right amount for your business. The cost of a policy is influenced by your trade, revenue, and claims history.

3. Does E&O cover a mistake made by my subcontractor?

Sometimes, but you shouldn't rely on it. The best practice is to require all subcontractors to have their own E&O policy. This transfers the risk to them and protects your insurance record.

4. What if a client just refuses to pay because they're unhappy?

E&O doesn't directly cover a simple payment dispute. However, clients often justify not paying by filing a counterclaim that your work was negligent. In that case, your E&O policy would kick in to defend you against those allegations.

5. My business is small. Do I really need this?

Yes. A lawsuit over a $50,000 mistake can be even more devastating to a small business than a large one. The risk is tied to the work you do, not how many people are on your payroll.

Takeaway Summary

Your General Liability policy is for accidents. Your E&O policy is for your work quality and professional advice. You need both to be fully protected.

In Oklahoma, E&O isn't required by the state, but it's often required by clients and is a critical tool for managing your business risk.

Questions to Ask Your Insurance Agent

When you talk to your agent, be ready with these questions:

Can you show me where my General Liability policy excludes my own faulty work?
Based on what my company does, what are my biggest E&O risks?
Is this a "claims-made" policy? What do I need to know about that?
Does this policy cover work done by my subs?
What are the biggest exclusions in this policy I should know about?
Are legal defense costs paid in addition to my policy limit, or are they deducted from it?

The Oklahoma Contractor’s Guide to Errors & Omissions (E&O) Insurance