E&O Claims Questions for Investment Advisors

Treat a threat like a real claim.

Do not argue with the client, promise to fix it personally, or offer to pay damages. Instead:

• Save all emails and notes
• Do not alter your file
• Report it immediately

Early reporting protects your coverage and gives the insurer the best chance to resolve the situation before it escalates.

A claim is usually a written demand for money or services because the client believes your advice caused financial harm.

Examples:

• “You should have recommended higher limits”
• “You enrolled me in the wrong plan”
• “I never declined that coverage”
• A lawsuit or attorney letter

The policy responds to written claims made and reported during the policy period.

Yes.

The carrier has the duty to defend you and selects defense counsel. Defense costs are paid as part of the policy coverage.

Even groundless allegations must still be defended.

Yes.

Legal fees are included inside the limit of liability.

So a long lawsuit can use part of the coverage even if you win.

This is the amount you pay first before insurance begins paying.

It applies to defense costs and settlements.

Think of it as your participation in the claim — not a penalty.

Yes — if:

• The claim is a covered loss
• Your retroactive date goes back far enough
• Your coverage never lapsed
• The claim is reported while the policy is active

This is why continuous coverage is critical.