Errors and omissions clause

An errors and omissions clause provides that a good faith mistake or oversight in administering the treaty does not deprive the cedant of cover, provided it corrects the error once it finds it. It targets clerical failures: a risk left off a bordereau, a cession entry keyed wrongly, an amount copied incorrectly. It keeps the penalty in proportion to the fault. A treaty covering thousands of policies runs through systems and people; errors in it are statistically certain, and losing a multi-million recovery over one mistyped line would turn reinsurance into an administrative lottery. The clause never covers bad faith, nor adverse selection dressed up as error, nor an omission that would have changed the reinsurer's decision had it known. That is where the disputes arise, on the line between protected clerical error and material non-disclosure, which the clause does not cover and which falls under the duty of utmost good faith owed to the reinsurer.