Intentional Acts, Fraud and Professional Liability Insurance (Errors & Omissions): When Coverage Ends

Professional Liability Insurance (Errors & Omissions or E&O) protects professionals and firms in the USA from allegations of negligent advice, design errors, missed deliverables and related financial harm. But one of the most common, high-stakes reasons carriers deny coverage is intentional acts and fraud. This article explains when coverage ends, how U.S. carriers treat intentional misconduct, and practical strategies for businesses in markets such as California (San Francisco Bay Area), New York City, Texas (Austin/Houston) and Florida (Miami) to manage these exclusions.

Why intentional acts and fraud matter for E&O

E&O is typically written on a claims-made and reported basis. The policy is intended to cover mistakes, omissions, and negligent acts — not deliberate wrongdoing. When an insured commits a knowingly wrongful act or fraudulent scheme, carriers commonly rely on explicit policy exclusions to deny defense and indemnity.

Key policy concepts:

• Intentional acts/fraud exclusion — usually bars coverage when the insured intentionally causes a loss or commits fraud.
• Criminal acts exclusion — excludes liability arising from criminal conduct.
• Claims-made trigger & retroactive date — coverage only for claims during the policy period (or within tail coverage if purchased).

For background on how exclusions operate and how to read them, see this practical guide: A Practical Guide to Reading Exclusions in Your Professional Liability Insurance (Errors & Omissions) Policy.

When coverage ends: Intentional acts vs. negligence vs. alleged fraud

The line between an intentional act and negligent conduct can be disputed. Below is a concise comparison.

(Notes: results depend on specific policy wording and applicable state law. California and New York courts have differing precedents on “intentional” vs “reckless” standards.)

Typical policy language and how carriers treat it

Most major U.S. carriers include clear exclusions for intentional misconduct. Examples of national carriers and market pricing context (U.S. small-to-mid sized firms, 2024 estimates):

• Hiscox USA — Hiscox promotes E&O for small businesses with entry-level premiums often starting around $500/year for lower-risk solo professionals (consultants, coaches) and rising with exposure. See Hiscox pricing overview: https://www.hiscox.com/small-business-insurance/cost (source).
• Insureon marketplace — sample ranges show $500–$1,500/year for small consulting practices, $1,500–$5,000/year for technology/professional practices with higher revenue or risk profiles. See Insureon cost guide: https://www.insureon.com/professional-liability-insurance/cost (source).
• Chubb, Travelers, CNA — national carriers typically underwrite larger E&O accounts (higher limits, tech/architect/engineering). Annual premiums commonly start at $5,000+ and can exceed $25,000–$100,000 for complex, high-limit programs.

For context on the purpose and limitations of E&O, see the Insurance Information Institute overview: https://www.iii.org/article/errors-and-omissions-insurance-eo (source).

Be aware: price varies widely by location (claims frequency in New York City and California tends to push premium up), revenue, professional discipline, contract terms (hold-harmless agreements), prior claims history, and whether the account requires cyber/E&O combined coverages.

Common scenarios that trigger coverage loss

• Contractual fraud: a professional deliberately falsifies deliverables to meet contract; insurer denies under intentional acts/fraud exclusion.
• Concealment/non-disclosure: material misstatements on the insurance application (e.g., prior claims concealed) can lead to rescission of the policy.
• Criminal conviction: if a court convicts an insured for fraud connected to the claim, carriers often rely on criminal acts exclusion.
• Policy-specific carve-outs: some E&O forms exclude certain types of intentional misrepresentation (e.g., securities fraud for advisors).

If a claim alleges fraud but the insured maintains it was an error, the insurer’s duty to defend may be triggered until fraud is proven. That makes early tender and counsel essential — see When Exclusions Trigger a Coverage Dispute: Steps to Manage a Professional Liability Insurance (Errors & Omissions) Claim.

Practical actions to protect your business (commercial intent)

1. Buy appropriate complementary coverages

   • Crime/fidelity bonds (employee theft, fraud).
   • Directors & Officers (D&O) for management liability.
   • Cyber liability (for breaches that may be tied to fraudulent acts).

2. Negotiate policy wording and endorsements

   • Seek an endorsement narrowing the “intentional acts” exclusion or carving back coverage for innocent co-insureds. See endorsement options: Endorsements to Close Common Gaps in Professional Liability Insurance (Errors & Omissions).
   • Negotiate contract provisions to avoid assuming unreasonable indemnities that may void coverage.

3. Tail coverage / extended reporting period

   • For claims-made policies, purchase an ERP (tail) when leaving a carrier or ceasing operations. Tail premiums typically range widely — often 100%–300% of the last annual premium depending on carrier and limits — ask your broker for a firm quote.

4. Operational controls to reduce fraud risk

   • Strong internal audit controls, dual approvals for payments, documented client communications, and secure file trails.

5. Professional advice and immediate steps if a claim arises

   • Tender the claim promptly. Preserve documents and avoid admissions.
   • Engage coverage counsel early (especially in New York or California where coverage litigation standards vary).
   • If denied, consider mediation, seeking coverage declination review, and exploring alternate indemnity sources (crime, D&O, client liability).

For negotiation tactics on exclusions, see: How to Negotiate to Remove or Limit Exclusions in Professional Liability Insurance (Errors & Omissions).

Example: San Francisco tech consultant vs. New York financial advisor

• San Francisco independent tech consultant (revenues <$500K): E&O with $1M/$2M limits — typical premium $800–$2,000/year with Hiscox or marketplace carriers; tail purchase if stopping gigs may cost 150%–200% of last premium.
• New York financial advisor: E&O plus regulatory exposures often requires higher limits and specialized forms; premiums often start at $5,000–$15,000/year with firms like AIG, Chubb, or Travelers depending on assets under advisement and contract risk.

Always obtain multiple quotes and review policy forms (not just price). Small differences in exclusion wording — particularly around “intentional acts,” “fraud,” “dishonesty” and “criminal act” — drive coverage outcomes.

Final checklist before you buy or renew E&O (U.S. focus)

• Review the intentional acts, fraud and criminal acts exclusions line-by-line.
• Confirm whether policy is claims-made and check the retroactive date.
• Ask for endorsements that protect innocent insureds and narrow exclusions.
• Compare quotes from Hiscox, Insureon marketplaces and admitted carriers (Chubb/Travelers/CNA) for your city (e.g., San Francisco, NYC, Austin).
• Budget for tail coverage if changing carriers or winding down services.
• Institute anti-fraud controls and keep complete documentation of client work.

Internal resources to deepen your coverage strategy:

• Top Exclusions in Professional Liability Insurance (Errors & Omissions) and How to Spot Them
• Endorsements to Close Common Gaps in Professional Liability Insurance (Errors & Omissions)
• When Exclusions Trigger a Coverage Dispute: Steps to Manage a Professional Liability Insurance (Errors & Omissions) Claim

Sources and further reading

• Hiscox — Small Business Insurance Cost guide (E&O examples): https://www.hiscox.com/small-business-insurance/cost
• Insureon — Professional Liability (E&O) cost guide and ranges: https://www.insureon.com/professional-liability-insurance/cost
• Insurance Information Institute — Errors & Omissions Insurance (E&O): https://www.iii.org/article/errors-and-omissions-insurance-eo

If you need a tailored analysis for a firm in a specific U.S. city (San Francisco, New York City, Austin, Miami, etc.), provide industry, revenue, and contract profile so you can compare carriers, forms and estimated premium impact.