E&O on the Fly, Part 2: Quick quiz highlights what you need to know about exclusions
As a financial advisor, you probably know a great deal about insurance. Consequently, you understand why life and health insurers must exclude certain losses in order to preserve company solvency. But what about the errors-and-omissions insurance you buy for your firm? Do you know what your policy covers exactly and what it doesn’t? In a prior article, we dealt with the former by reviewing the E&O insuring agreement. This time, we’ll discuss the major exclusions included in most contracts.
Already know your E&O exclusions? Then verify your knowledge by completing this quick 12-question true/false quiz:
- True or False: E&O insurance in certain cases will cover you for claims arising out of litigation that occurred prior to the policy’s inception date or were pending at that date.
- True or False: E&O insurers will generally never approve claims submitted by a parent, spouse, domestic partner, or child of the E&O insured.
- True or False: A business entity in which an E&O insured has an ownership stake will not qualify to receive an errors-and-omissions settlement.
- True or False: Financial penalties imposed by regulatory entities such as SEC, FINRA, and state insurance departments may qualify for E&O reimbursement as long as they don’t exceed $10,000.
- True or False: A financial advisor who unconsciously or accidentally violates a law, financially harming a customer in the process, may qualify for E&O coverage.
- True or False: An investment advisory client claiming to have suffered undue stress, anxiety, and depression resulting from unsuitable securities recommendations can receive E&O insurance payments for resulting psychiatric care.
- True or False: Errors-and-omissions insurance for life and annuity insurance agents is elastic. In other words, if an agent also provides actuarial, legal, or tax services to an insurance client and makes a mistake doing so, full E&O coverage is available.
- True or False: An E&O policy in certain cases will provide benefits to insureds who claim their advisor charged them an excessive fee or insurance premium.
- True or False: If an insurance agent advises a client to buy insurance from a company that appeared to be solvent, but later fails, the client can seek reimbursement from the agent’s E&O insurance policy.
- True or False: Errors-and-omissions insurance is the primary recourse for customers who have disputes with an advisor regarding ERISA health and welfare/pension plans, employment practices, or intellectual property infringement.
- True or False: Financial advisors will not be covered against E&O losses stemming from the use or disclosure of confidential client information or non-public information (in connection with securities).
- True or False: Clients have no E&O claim options as long as their advisor dispute is part of a class-action lawsuit.
• Have you ever had a problem resulting from an unexpected or unknown E&O exclusion? Please share your experience on this new thread.
Next page: The correct answers
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