California Property & Casualty Broker-AgentCasualty InsuranceMedium
A client operates a consulting firm and is concerned about potential lawsuits if their advice leads to a client's financial loss. They are considering a Professional Liability policy. Which of the following scenarios would typically be covered by such a policy?
- AA consulting firm employee is injured while driving a company car to a client meeting.
- BThe consulting firm's principal consultant provides incorrect financial advice, leading to a significant loss for their client.
- CThe consulting firm's server is hacked, leading to a data breach of client information.
- DA client slips and falls on the wet floor of the consulting firm's office, sustaining an injury.
Show answer & explanationAnswer & explanation
Correct answer: B. The consulting firm's principal consultant provides incorrect financial advice, leading to a significant loss for their client.
Professional Liability policies (E&O) are designed to cover financial losses incurred by clients due to negligent acts, errors, or omissions in the professional services provided by the insured. Providing incorrect financial advice leading to client loss is a direct example of such a claim.
Why the other options are wrong
- A. This involves a commercial auto accident and employee injury, covered by Commercial Auto and Workers' Compensation policies, respectively.
- C. This is a cyber liability risk, covered by a Cyber Liability insurance policy, not standard Professional Liability.
- D. This is a premises liability claim, covered by a Commercial General Liability (CGL) policy, not Professional Liability.
Professional Liability Scope
Professional Liability insurance (E&O) covers claims arising from actual or alleged negligent acts, errors, or omissions in the performance of professional services, resulting in financial damage to a third party.
- Covers financial loss to clients.
- Triggered by professional errors or omissions.
- Distinct from general liability or property damage.
Memory trick: When professional words go wrong, E&O makes the client strong.