Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)Casualty InsuranceEasy
A Florida-based consulting firm provides highly specialized financial advice to large corporations. Due to a complex and unusual market downturn, the firm's advice leads to significant financial losses for one of its corporate clients, who then sues the consulting firm for negligence. The firm holds a Professional Liability (Errors & Omissions) policy. Which of the following is most likely to be covered under this policy?
- ADamage to the firm's office furniture due to a burst pipe.
- BBodily injury to a client who slipped and fell in the firm's office.
- CDamages resulting from the consulting firm's employee stealing client funds.
- DCosts associated with defending the firm against the client's negligence lawsuit.
Show answer & explanationAnswer & explanation
Correct answer: D. Costs associated with defending the firm against the client's negligence lawsuit.
Professional Liability (Errors & Omissions) insurance is designed to cover claims arising from professional services, including defense costs and judgments for errors, omissions, or negligence in the performance of those services. The scenario describes a lawsuit for negligence in providing financial advice, which falls directly under this coverage.
Why the other options are wrong
- A. Damage to the firm's property is typically covered by Commercial Property Insurance, not Professional Liability.
- B. Bodily injury to a client on the premises is typically covered by Commercial General Liability (CGL), not Professional Liability.
- C. Employee theft is typically covered by Crime Insurance, not Professional Liability.
Professional Liability (E&O) Coverage
Insurance that protects professionals and companies from claims of negligence, errors, or omissions in the performance of their professional services.
- Covers financial losses due to professional mistakes.
- Includes defense costs, even if the claim is baseless.
- Different from General Liability, which covers bodily injury/property damage.
Memory trick: E&O defends your professional 'oops'.