Texas All Lines Adjuster Practice Test

What does "Errors and Omissions" insurance cover?

1. Property damage due to negligence

2. Losses from natural disasters

3. Liability for professional oversights

4. General liability of businesses

The correct answer is: Liability for professional oversights

"Errors and Omissions" insurance specifically covers liability for professional oversights or mistakes made by professionals in the course of providing their services. This type of insurance is highly relevant for professionals such as consultants, accountants, architects, and insurance agents, among others, who provide specialized services and advice. When these professionals inadvertently provide incorrect information, omit crucial details, or fail to perform their duties to the required standard, they could face lawsuits for damages. This coverage protects the individual or firm from claims that could arise from these professional errors, helping to mitigate significant financial losses resulting from legal defense costs or settlements. Although property damage or natural disasters are important factors to consider in the insurance sector, "Errors and Omissions" insurance is distinct in that it deals primarily with professional liability rather than general liability or physical damage coverage.