Errors and omissions (E&O) insurance protects an insurance agent against losses arising from:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
E&O insurance, a form of professional liability coverage, protects the agent against claims alleging negligence, errors, or omissions in professional work — for example, failing to procure the coverage the client requested, giving incorrect advice about policy terms, or missing a deadline to bind coverage. Because a single mistake can expose the agent to a lawsuit for the loss the client suffers, E&O coverage is considered essential for practicing producers. E&O policies expressly exclude dishonest, criminal, or fraudulent acts by the insured, because intentional wrongdoing is uninsurable as a matter of public policy. Carrying E&O demonstrates professionalism and is often required by insurers or agencies before a producer is appointed.
Why the other options are wrong
- B) Intentional wrongdoing, including fraud and criminal acts, is excluded from E&O coverage; deliberate misconduct is not the kind of professional mistake the policy is designed to protect. E&O insurers underwrite professional conduct, so they exclude the deliberate acts that would be uninsurable as a matter of public policy.
- C) E&O covers professional liability for errors in service, not investment or market losses in the products sold; the agent is not a guarantor of product performance. The agent's professional duty is to place suitable coverage, not to guarantee the performance of the products the client buys.
- D) Dishonesty is uninsurable as a matter of public policy and is expressly excluded from E&O policies, so claims of dishonesty are not covered. Claims based on dishonesty would put the insurer in the position of paying for the agent's wrongdoing, which public policy forbids.
Memory hook
E&O = a safety net for honest mistakes, not a shield for fraud.