Errors and omissions (E&O) insurance protects an insurance agent against:

Why B is correct

E&O insurance, also called professional liability insurance, covers the agent for claims of negligence, error, or omission in the performance of professional duties, such as failing to place coverage, misquoting policy terms, or giving flawed advice. It is not coverage for the clients' insured losses, which are paid by the clients' own policies. Many insurers require producers to carry E&O protection because a producer error can expose the insurer to liability, and the coverage also protects the agent's personal assets from a negligence claim.

Why the other options are wrong

• A) Client losses from covered events are paid by the clients' own insurance policies. They are not paid by the agent's E&O coverage. The clients' own policies pay their covered losses; E&O exists to defend the agent's professional mistakes.
• C) License renewal costs are ordinary business expenses. They are not insurable losses covered by an E&O policy. License renewal fees are ordinary costs of doing business and are not the subject of professional liability insurance.
• D) Automobile liability is covered by auto insurance. Professional liability insurance does not cover personal auto claims. Personal auto exposure is covered under the agent's auto policy, which is entirely separate from E&O coverage.

Memory hook

E&O = insurance for the insurance agent's own mistakes. It protects the professional, not the client's loss.