Montana Real Estate Law mandates E&O insurance. What is its purpose?

Option A is incorrect because E&O insurance protects agents, not clients, against claims of professional negligence. Client protection against fraud is typically addressed through different types of insurance or legal remedies, not through errors and omissions coverage. E&O insurance specifically covers professionals against claims related to mistakes or failures in their professional services.

Option B is incorrect because E&O insurance protects agents from false claims, not clients. This insurance is designed to defend real estate professionals when clients make false accusations about inadequate work or negligence. The policy covers legal defense costs and potential settlements, but it does not provide protection to clients against any claims they might make.

Option C is incorrect because it's too narrow. While E&O insurance does protect agents against error claims, it specifically covers negligence, not just any errors. The term 'negligence' implies a failure to exercise proper care, which is a higher standard than simple errors. Option D is more accurate because it specifically mentions negligent actions, which is the precise coverage provided by E&O insurance.