You advised a small business owner to pivot their marketing strategy to TikTok and drop their email list. Their sales plummeted 60%, and they had to lay off staff. They are suing you for $200,000 in lost revenue, claiming your advice was negligent and breached your “duty of care.”
Key Takeaways
- Commercial E&O is Mandatory: General Liability covers injuries. Business Coaching risks are almost entirely financial. You need “Professional Liability” with high limits ($1M+).
- Standard of Care: The court asks: “Would a prudent business coach have given this advice?” If you guessed without data, you are negligent.
- Contractual Limitations: Your contract needs a “Limitation of Liability” clause capping damages at the total fees paid (e.g., $5,000, not $200,000).
- Breach of Contract vs. Negligence: Insurance covers negligence. It often excludes “Breach of Contract.” The wording of the lawsuit matters.
The “Why” (The Trap): The “Results” Trap
Business coaches often sell “Results.” “Scale to 7 Figures!”
When you promise a result and don’t deliver, that is a contractual failure. Insurance policies typically exclude “Warranties and Guarantees.” If the lawsuit says “Coach promised 2x growth and failed,” insurance denies it. If the lawsuit says “Coach gave negligent advice that caused harm,” insurance defends it.
The Investigation: Protecting the Pivot
I called three carriers specializing in B2B liability.
1. The Hartford
- My Analysis: Excellent for business consultants.
- The Coverage: Their “Technology & Professional Services” policy is robust. It covers “negligent acts, errors, or omissions.”
- Pros: High limits available ($2M+).
2. Hiscox
- My Analysis: Their “Business Consulting” classification is accurate.
- The Defense: They defend you even if the claim is groundless. This is vital because business owners sue out of anger when failing.
3. Next Insurance
- My Analysis: Good for smaller coaches.
- The Gap: Check if they cover “Management Consulting.” If you are misclassified as a “Life Coach,” they might deny a business-related claim.
Comparison Table: Business Liability
| Carrier | Best For | Covers “Bad Strategy”? | Est. Cost |
| The Hartford | High-Rev Consultants | Yes | $800+ |
| Hiscox | Solo Business Coaches | Yes | $500+ |
| General GL | No one (for this risk) | No | $300 |
[IMAGE: Photo of a ‘Limitation of Liability’ clause in a coaching contract]
Step-by-Step Action Plan
- Cap Your Liability: Update your contract today. Clause: “Client agrees that Coach’s total liability is limited to the amount of fees actually paid by Client.”
- Use Data, Not Guarantees: In your emails, say “Based on market trends…” not “This will definitely work.”
- Get Signed “Strategy Approvals”: Before a big pivot, send a document: “As discussed, we are shifting strategy. Client approves this direction.” Get them to sign/reply. It shifts responsibility to them.
- Verify Classification: Call your agent. Ensure you are rated as “Business Consultant” or “Executive Coach,” not just “Life Coach.”
FAQ Section
Can they sue me if they just didn’t do the work?
Yes, but you will win if you have records. Document missed tasks: “Client failed to execute Step 1.”
Does an LLC protect my personal assets?
It helps, but E&O insurance protects the business’s cash flow. A $50k legal bill can bankrupt a small LLC even if your house is safe.
Is ROI considered a ‘Guarantee’?
If you put it in writing (“10x ROI”), yes. Avoid specific numbers in contracts.