Sep 19, 2023

Why Construction Businesses Cannot Ignore E&O Insurance

High-quality workmanship is essential in construction, as it will affect residents’ safety for years. A single poorly made project can result in extensive property damage, life-changing injuries, and even deaths. If victims can prove negligence in such a case, a company may be on the hook for millions of dollars. Directors and officers of construction companies should research and maintain E&O policies to protect their businesses from this disastrous fallout.

An E&O Policy Provides Peace of Mind

There are strong safety regulations in the construction industry. Thus, every good contractor knows these laws inside and out. The best companies prioritize safety from the top down, fostering a culture of integrity and pride in artisan work.

But unforeseen events can interfere with quality. For example, subpar materials may degrade faster than anticipated, leading to issues decades later. Perhaps the regulations don’t account for new concerns associated with cutting-edge designs, and the problem only comes to light when structures fail.

There’s also the ever-looming problem of cost. Owners may push for cheaper materials and labor to save money, despite the safety risks. Understandably, contractors must work with their clients to balance expenses and meet regulations.

E&O insurance for construction businesses ensures companies don’t bear the brunt of adverse outcomes for factors beyond their control. This peace of mind lets directors and officers focus on building the business’s future rather than worrying about things that could go wrong.¬†

Errors & Omissions Insurance Bolsters Your Reputation

An E&O policy isn’t just a contingency plan. Moreover, it’s a signal to potential customers that the business considers the future. Larger corporations may skip over contractors that don’t have errors & omissions insurance.

Commercial enterprises must undergo the underwriting process to obtain any type of insurance, which allows insurance companies to determine what kind of risk the customer poses. If the risk is too high, the customer gets denied, or the insurance may offer a premium the customer can’t afford. When potential construction clients see that a business lacks errors & omissions insurance, they may assume the company is careless in its craftsmanship and move on to the next option. Conversely, holding an insurance policy shows a third party deemed the construction company low-risk.

E&O Policies Can Save You Money

Last but certainly not least, errors and omissions insurance safeguards your company from financial ruin. Civil suits can cost a fortune, even if the defendant eventually wins. The cost of hiring a lawyer can get astronomical, especially if the case drags out over years. Small businesses feel the pressure even more acutely, as they don’t have the same resources as national corporations.

Insurance companies alleviate this burden by handling the financial and logistical issues:

  • Paying for legal representation
  • Covering settlement costs
  • Tracking deadlines

An E&O policy also means that directors and officers don’t have to dedicate as much time to the court case, ensuring they have the necessary energy to focus on the company. Even unfounded accusations can seriously hurt a business’s reputation, and corporate boards must devote resources to damage control. Daily operations also require oversight to keep the company from going under.


The construction industry’s inherent complexities and potential for human error make it vulnerable to costly lawsuits arising from claims of negligence. The consequences of a single mistake can be catastrophic, and without proper protection, construction companies risk facing immense financial and reputational damage that could threaten their very existence.

Oakwood Insurance strongly advises construction companies and their directors and officers to prioritize E&O insurance as an indispensable part of their risk management framework. By doing so, they can build a solid foundation for their business, ensuring its ability to thrive in the face of unforeseen challenges while upholding the utmost standards of safety and quality for the communities they serve.

About Oakwood D&O Insurance 

Oakwood D&O Insurance provides industry leading insurance services, solutions, and counsel to our clients.

Our professionals are valued for their ability to provide outstanding customer service, with a commitment to the relentless pursuit of value-added solutions, results and comprehensive coverage.

Oakwood D&O at Work

One of our clients had been purchasing D&O insurance from the same carrier for several years. We looked at their tower and realized that not only was their primary carrier not A+ rated, they were also paying too much for the primary layer. We were able to move the coverage to A+ rated paper and save the client six figures.