Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)Casualty InsuranceMedium
A small Florida consulting firm provides financial advice to high-net-worth individuals. One of their consultants makes a significant error in recommending an investment strategy, leading to a client losing $500,000. The client sues the consulting firm for negligence. Which type of liability policy would specifically cover this claim?
- ACommercial General Liability (CGL)
- BProfessional Liability (Errors & Omissions)
- CDirectors and Officers (D&O) Liability
- DFidelity Bond
Show answer & explanationAnswer & explanation
Correct answer: B. Professional Liability (Errors & Omissions)
Professional Liability, also known as Errors & Omissions (E&O) insurance, is designed to protect professionals from claims of negligence, errors, or omissions in the professional services they provide. The scenario describes a claim arising directly from a professional error, making E&O the appropriate coverage.
Why the other options are wrong
- A. CGL covers bodily injury and property damage, not financial loss due to professional negligence.
- C. D&O liability covers claims against directors and officers for wrongful acts in their management capacity, not professional services.
- D. A fidelity bond protects against financial losses due to employee dishonesty, not professional negligence.
Professional Liability (E&O)
Insurance that protects professionals and companies against claims of negligence, errors, or omissions in the professional services they provide, leading to financial loss for clients.
- Covers errors, omissions, negligence.
- Specific to professional services.
- Protects against financial loss claims.
- Also known as Malpractice insurance in some fields.
Memory trick: Business Liability: Know your risks, get the right 'Pro'-tection.