California Property & Casualty Broker-AgentCasualty InsuranceMedium
A California-based independent contractor, operating as a sole proprietor, provides consulting services. They are purchasing a Professional Liability policy. Which of the following activities would typically be covered under their Professional Liability policy?
- AFinancial loss incurred by a client due to negligent advice provided by the contractor.
- BDamage to the contractor's laptop caused by a coffee spill.
- CLibelous statements made by the contractor in a marketing brochure.
- DBodily injury to a client's employee while visiting the contractor's office.
Show answer & explanationAnswer & explanation
Correct answer: A. Financial loss incurred by a client due to negligent advice provided by the contractor.
Professional Liability insurance (also known as Errors & Omissions or E&O) is specifically designed to cover financial losses to third parties resulting from negligent acts, errors, or omissions in the professional services provided by the insured. Negligent advice leading to financial loss is a direct fit.
Why the other options are wrong
- B. This is property damage to the contractor's own property, typically covered by a commercial property policy, not professional liability.
- C. This would typically be covered under Coverage B (Personal and Advertising Injury) of a Commercial General Liability policy, not Professional Liability.
- D. This would typically be covered by a General Liability policy, not Professional Liability.
Professional Liability Coverage
Professional Liability insurance protects professionals and businesses against claims of negligence, errors, or omissions in the professional services they provide.
- Covers financial damages to third parties.
- Triggered by professional services performed.
- Often called Errors & Omissions (E&O) insurance.
Memory trick: Professionals' Poor Performance Pays Penalties.