Costs, Price Factors and 2026 Rules
CGL vs professional liability (E&O) insurance in Canada: which do you need?
The difference between commercial general liability and errors and omissions insurance in Canada, occurrence vs claims-made, defence costs, Quebec rules and who needs both.
Commercial general liability (CGL) insurance covers bodily injury and property damage your business causes to other people, plus personal and advertising injury. Professional liability insurance, also called errors and omissions (E&O), covers financial loss a client suffers because of your advice, design, service or a mistake in it. If a client trips over your laptop bag, that is a CGL claim. If your software configuration error stops a client's online store for a week, that is an E&O claim. Most consultants, designers, IT providers and other professionals need to consider both, because each policy usually excludes what the other covers.
This guide is part of the business liability insurance cost overview.
What each policy covers
| Commercial general liability | Professional liability (E&O) | |
|---|---|---|
| Trigger | Bodily injury or property damage during the policy period (occurrence) | Claim first made against you during the policy period (claims-made) |
| Typical harm | Injury, damaged property, defamation in advertising | Financial loss from errors, negligent advice, missed deadlines |
| Typical claimant | Customers, visitors, neighbours, members of the public | Clients who paid for your service |
| Defence costs | Usually paid in addition to the limit | Often paid inside the limit outside Quebec |
| Professional services | Excluded | The core of the cover |
| Rating basis | Revenue, payroll or area | Revenue, type of service, contract size |
Most Canadian CGL policies follow a structure based on the Insurance Bureau of Canada's model wording, with coverage parts for bodily injury and property damage, personal and advertising injury, medical payments, and tenants' legal liability. Professional liability wordings vary much more between insurers and professions.
Occurrence vs claims-made: the difference that causes the most trouble
A CGL policy is usually occurrence-based: it responds to injury or damage that happened while the policy was in force, even if the claim arrives years later. If a customer was injured in 2026 and sues in 2028, the 2026 policy responds.
A professional liability policy is usually claims-made: it responds to claims first made, and often also reported, while the policy is in force, for work done after a retroactive date shown in the policy. If you cancel your E&O policy when you retire, a claim made the following year about work you did in 2025 may have no policy to respond, unless you buy an extended reporting period.
The claims-made gaps guide shows how retroactive dates and limitation periods interact, including Ontario's two-year basic limitation period and Quebec's three-year period.
Defence costs: inside or outside the limit
Under a standard CGL policy, the insurer's defence costs are generally paid in addition to the limit. Many professional liability policies sold in common-law provinces instead pay defence inside the limit, so every dollar spent on lawyers reduces what is left for a settlement.
An illustrative example: a $1 million E&O policy with defence inside the limit. The claim takes two years and $280,000 in legal and expert costs before settling. Only $1,000,000 - $280,000 = $720,000 remains for the settlement. If the settlement is $850,000, you owe $850,000 - $720,000 = $130,000, plus your deductible.
Quebec is different. Article 2503 of the Civil Code of Québec requires a liability insurer to take up the defence of the insured, and states that the costs of the defence and interest on the proceeds are borne by the insurer over and above the insurance proceeds. Ask your broker how a policy issued for Quebec operations handles defence costs, and see provincial rules and Quebec differences.
Who needs which
| Business | CGL | Professional liability | Why |
|---|---|---|---|
| Retail shop | Yes | Rarely | Main risk is premises and products |
| IT consultant working remotely | Often required by contracts | Yes | Main risk is financial loss from errors |
| Architect or engineer | Yes, for site visits | Usually compulsory through the professional body or contracts | Design errors can cause both injury and financial loss |
| Hair salon or esthetician | Yes | Often a malpractice or professional endorsement | Treatments can injure clients |
| Bookkeeper | Contracts may require it | Yes | Errors cause financial loss |
| General contractor | Yes, including completed operations | Only if offering design-build | Physical risk dominates |
| Real estate brokerage, mortgage brokerage, lawyer | Yes | Required by the regulator or law society program in most provinces | Regulated professions |
Many regulated professions in Canada must carry professional liability insurance, and some obtain it through a mandatory program. Lawyers in Ontario, for example, are insured through LAWPRO, and Quebec lawyers through the professional liability insurance fund of the Barreau du Québec. Your professional order, law society or regulator sets the minimum.
Buying both: packages and gaps
Some insurers sell CGL and E&O together for professionals. That simplifies renewal but check:
- Are there separate limits for each, or one shared limit?
- Is the E&O part claims-made with a retroactive date matching your previous policy?
- Does the CGL exclude professional services broadly enough to leave a gap for "hybrid" claims, such as an installer's faulty setup advice that also causes water damage?
- Is cyber or privacy liability excluded from both? It usually is; see cyber and privacy breach gaps.
Cost comparison, illustrative
An illustrative Calgary marketing consultancy with $420,000 revenue receives:
- CGL $2 million: $780 a year
- E&O $1 million, defence inside limits, $2,500 deductible: $2,150 a year
- E&O $2 million, same terms: $2,890 a year
The extra $1 million of E&O costs $2,890 - $2,150 = $740, which is about 34% more for twice the limit. If the consultancy's largest client contract requires $2 million in professional liability, the cheaper option is not available anyway. The limits guide explains how to decide when no contract sets the minimum.
Frequently asked questions
Does CGL cover a mistake in my advice?
Generally no. CGL policies exclude the rendering of, or failure to render, professional services. Financial loss from an error belongs under professional liability.
Can I switch from one E&O insurer to another without a gap?
Yes, if the new policy keeps your existing retroactive date. Ask for it in writing before you cancel the old policy.
Is professional liability mandatory in Canada?
Not for every business. It is mandatory for many regulated professions under provincial rules, and it is often required by client contracts.
What is a "tail"?
An extended reporting period that lets you report claims after a claims-made policy ends, for work done before it ended. It is bought when you retire, sell or close the business.
Sources
- Insurance Bureau of Canada — explanations of liability and professional liability insurance
- Civil Code of Québec on LégisQuébec — articles on liability insurance and defence costs
- LAWPRO — the mandatory professional liability program for Ontario lawyers
- Autorité des marchés financiers — insurance supervision in Quebec
