Texas General Lines — Property and CasualtyCommercial LinesMedium
A software development company is concerned about potential lawsuits arising from errors or omissions in their software code that cause financial harm to their clients. Which type of professional liability insurance is specifically designed to cover this exposure?
- AEmployment Practices Liability Insurance (EPLI)
- BCommercial General Liability (CGL)
- CErrors and Omissions (E&O) Insurance
- DDirectors and Officers (D&O) Liability
Show answer & explanationAnswer & explanation
Correct answer: C. Errors and Omissions (E&O) Insurance
Errors and Omissions (E&O) insurance, also known as Professional Liability, is specifically designed to protect professionals (like software developers, consultants, doctors, etc.) from claims of negligence, errors, or omissions in the performance of their professional services that result in financial loss to a third party.
Why the other options are wrong
- A. EPLI covers claims arising from employment-related issues like discrimination or wrongful termination, not professional service errors.
- B. CGL covers bodily injury and property damage to third parties, not purely financial losses from professional advice or services.
- D. D&O covers wrongful acts by directors and officers in their management capacity, not professional errors in service delivery.
Errors and Omissions (E&O) Insurance
A professional liability insurance policy that covers financial losses suffered by third parties due to the insured's negligent acts, errors, or omissions in the performance of their professional services.
- Crucial for service-based businesses and professionals.
- Covers financial damages, defense costs.
- Distinguished from CGL, which covers BI/PD.
Memory trick: When professional work goes wrong, 'E&O' makes you strong.