If an agent intentionally misrepresents on an application, who might end up paying the claim?

• A. Only the insured
• B. The agent and the agent's E&O insurer
• C. The insurer's reinsurer
• D. The state regulator

Answer: (B)

When an agent intentionally misrepresents information on an insurance application, it falls under the agent’s professional liability. An agent’s Errors & Omissions (E&O) policy is designed to cover claims arising from mistakes or negligence in providing professional services. If a client sues or a claim is made due to the misrepresentation, the E&O policy typically handles the defense and pays damages up to policy limits. So the financial responsibility for the claim, including defense costs and settlements, comes from the agent’s E&O insurer, not from the reinsurer or the state regulator, and not solely from the insured client. The agent may be personally liable beyond policy limits, but the insurer is the primary payer for covered claims.