Property & Casualty Insurance Exam (National Portion)Types of PoliciesMedium
A small non-profit organization provides counseling services. They are concerned about potential lawsuits arising from alleged negligence or errors in the professional advice given by their counselors. Which type of policy would best protect the organization against such claims?
- ACommercial General Liability (CGL) Policy
- BBusinessowners Policy (BOP)
- CProfessional Liability Policy
- DWorkers' Compensation Policy
Show answer & explanationAnswer & explanation
Correct answer: C. Professional Liability Policy
Professional Liability insurance, also known as Errors & Omissions (E&O) insurance, is specifically designed to protect businesses and individuals against claims of negligence, errors, or omissions in the professional services they provide. Counseling services fall under this category.
Why the other options are wrong
- A. A Commercial General Liability (CGL) policy covers bodily injury and property damage arising from premises, operations, products, and completed operations, but it generally excludes professional services liability.
- B. A Businessowners Policy (BOP) combines property and general liability coverage for small to medium-sized businesses but typically excludes professional liability exposures.
- D. A Workers' Compensation Policy covers employees' work-related injuries and illnesses, not claims arising from professional negligence to third parties.
Professional Liability Insurance (E&O)
Insurance that protects professionals and businesses against claims of negligence, errors, or omissions in the provision of their professional services.
- Also known as Errors & Omissions (E&O) insurance.
- Covers legal defense costs and damages up to policy limits.
- Essential for service-oriented businesses like doctors, lawyers, consultants, and counselors.
Memory trick: General is physical, Professional is advice, Workers is employee injury.