What Insurance Covers Bad Professional Advice?

A client who says it relied on incorrect professional advice may bring a negligence or services claim seeking financial damages. Professional liability insurance, also called errors and omissions, is the coverage line to review. Texas Department of Insurance guidance describes it as protection for claims arising from professional services and notes that a mistake causing a client financial loss may be covered. Whether advice qualifies depends on the business’s actual services and policy wording.

Policies may exclude intentional wrongdoing, known circumstances, particular advice or product lines, and liabilities assumed only by contract. The policy can also distinguish a covered claim for damages from the cost to redo work, refund fees, or satisfy a performance guarantee. If a customer’s allegations include privacy, bodily injury, or intellectual property, another coverage section may be relevant too.

Check the professional-services definition, covered damages, exclusions for advice or guarantees, retroactive date, prior-knowledge language, reporting deadline, and defense-cost limit. Describe the advice your business gives in the application and compare that description with the issued policy. Do not rely on a generic E&O label if the work is specialized.