Do you or your business provide professional services or advice to other businesses or individuals? Could your counsel or service lead to losses by your client for which you could be held responsible? If so, you’ll likely want to purchase professional liability insurance, also known as errors and omissions insurance (E&O). Show
Claims not covered by general liability insurance that are covered by professional liability insurance include negligence, misrepresentation, violation of good faith and fair dealing, and inaccurate advice. What types of businesses need professional liability insurance?In some states, professional liability insurance is required, especially for attorneys and doctors. Legal and medical malpractice insurance policies are special types of professional liability insurance. Other professionals that should consider professional liability insurance include:
This list is not exhaustive. Consult with your insurance professional or inquire with your profession’s trade association to determine if you might need professional liability coverage. What’s covered… and what’s notThere are two types of professional liability polices: claims-made and occurrence. Most professional liability insurance policies are “claims-made,” meaning that the policy must be in effect both when the event took place and when a lawsuit is filed for a claim to be paid. If, however, you change careers or retire, you may want to purchase an “occurrence” policy that will cover any claim for an event that took place during the period of coverage—even if the suit is filed after the policy lapses. Professional liability insurance will pay the cost of legal defense against claims and payment of judgments against you, up to the limit of the policy. In general, coverage does not extend to non-financial losses or losses caused by intentional or dishonest acts. Other fees, such as licensing board penalties, may also be included. Policies will generally have a deductible ranging from $1,000 to $25,000. The amount of professional liability insurance you will need and how much it will cost depends upon the size of your business and the level of risk it poses. You may be able to include professional liability coverage in a Commercial Package Policy (CPP) as an endorsement. Note, however, the professional liability coverage is not included in an in-home business policy or Business Owners Policy (BOP). Also known as Errors and Omissions insurance, Professional Liability insurance is designed to protect your business against claims for negligence, misrepresentation or mistakes. As a professional, you are exposed to the potential risk of clients making allegations for financial damages due to the services or products your business provides. For certain kinds of professional practices like medical and legal, Professional Liability insurance is required by law. It is important to remember that this type of insurance is not part of a General Liability insurance policy. In the event that a dissatisfied client sues you due to an error you or an employee has made, you can call on your professional liability insurance to assist you with the costs associated with recruiting an attorney and settling any cases. Professional liability insurance is designed to cover service providers against claims of alleged or actual negligence that emerge during the course of delivering professional services; for instance, making a minor error that has significant consequences, offering incorrect advice, or failing to deliver a service. Professional liability insurance coverage covers defense costs and damages costs to the level outlined in the policy, irrespective of whether an error was made. For instance, let’s say you’re an accountant and your client claims you filed incorrect taxes, which led to a loss of money. In such a situation, you can draw from your professional liability insurance to assist you to cover legal and settlement costs. Professional liability insurance typically covers the following:Errors and oversightsSometimes a basic error can lead to the loss of a lot of money. If a client sues due to a mistake made by your business, you can use your professional liability insurance to pay for legal defense costs. Undelivered servicesIf you have promised that you will deliver a certain service in a certain way and fail to do so, your client may sue—especially if the failure to live up to expectations has a negative impact on your client’s business. Negligence accusationsIf you are accused of negligence—for instance, on the grounds your work did not meet industry standards—you may be hit with a professional liability lawsuit. Missed deadlinesIf a service professional fails to meet a deadline, the client may encounter serious issues and expenses. Professional liability insurance can protect you if a client sues you for failing to deliver milestones on time. What does professional liability insurance not cover?Customer injuries or property damageIn the event a customer sustains an injury while visiting your premises or you damage something on the client’s site, you will need general liability insurance to assist you to contribute to any medical expenses or repairs. General liability insurance will also cover you for any legal expenses if the customer decides to prosecute. Employee injuriesIn the event workers experience work-related injuries or fall ill, their medical expenses will be covered by workers’ compensation insurance. Damage to business propertyAny items that are stolen, damaged, lost or destroyed are covered by the business owner’s policy (BOP). Employee discrimination lawsuitsEmployment practices liability insurance (EPLI) is designed to cover any legal costs associated with wrongful termination, harassment, or discrimination. Vehicles used by a businessIt is a legal requirement for business-owned vehicles to be covered by commercial auto insurance. As such, you should ensure that any leased or personal vehicles that are used by a business are covered by hired and non-owned automobile insurance. Contingent bodily injuryContingent bodily injuries are any injuries that a customer or client sustains that are indirectly linked to your professional service. To cover contingent bodily injuries, you will need product liability insurance. How Professional Liability Coverage differs from General Liability?Both general liability insurance and professional liability insurance are designed to protect your business against the liabilities small businesses may encounter; however, they are designed to address different types of lawsuits. Depending on the risks associated with your business or service, you may need to purchase one or both policies. What is general liability insurance?General liability insurance covers the basic lawsuits that all businesses can encounter at any time. Essentially, you will need it if a third party (someone who doesn’t work for your business) decides to sue you for one of the following reasons: – They incurred bodily injuries while on your commercial premises – You caused some form of damage to their property – Your advertising strategies have caused them some form of injury (copyright infringement, misappropriation, slander, libel). What does general liability insurance pay for?General liability insurance pays for any legal expenses you encounter when responding to a third-party lawsuit. Examples of costs could include court costs, attorney fees, judgements or settlements. Any small business owner in any organization or field can encounter a general liability claim. It is for this reason that this policy should form the very foundation of your protection strategy. Professional liability and general liability are associated with different risk exposures. General liability insurance will assist you with any lawsuits that emerge due to a visitor having an accident on your property, while professional liability insurance will assist you with any lawsuits that emerge due to accusations of professional mistakes. Professional liability covers financial damages, while general liability covers physical damages. In some cases, a general liability policy may incorporate some form of products-completed liability insurance that is designed to cover professionals who own retail, construction, manufacturing, and other service businesses. This is designed to protect you from any lawsuits related to completed works that cause some form of physical harm to another party. While this may appear to be the domain of professional liability, the yardstick lies in the term physical damage. Professional liability insurance is limited to financial damage. Which policy makes sense for your business?In most cases, you will need both professional liability and general liability insurance to ensure you are protected against both physical damage and financial damage. This is most certainly the case if you operate in the professional services industry or rent/own commercial property that is accessible to the public. It can be possible in some cases to operate without either policy in place; however, it is a very risky route to take and not advisable. Someone could have an accident in your building or claim you did not fulfil the claims of a contract at any time. Who needs professional liability insurance?Professional liability insurance, which is also referred to as professional indemnity or errors and omissions coverage, covers small business owners or professionals who leverage their knowledge to make a living. Just some of the specialists who should consider purchasing professional liability insurance are as follows:
Why should you have Professional Liability Insurance?Commercial General Liability (CGL) insurance offers sufficient protection for the majority of small businesses. The clauses contained with CGL policies can be adjusted in line with your requirements; however, even the most basic policy can protect you against liability for things such as customers slipping on a wet floor or getting ill after eating your food. However, it is important to note that CGL does not protect customers against rendering or failing to render professional services. For that, you will need professional liability insurance. What actions could result in a Professional Liability claim?Below are some examples of different professions and the potential type of claims that could be covered by a Professional Liability insurance policy. Example 1 – An IT engineer builds a faulty website for a client that crashes just before they launch a new product. The client sues the IT engineer for negligence and loss of income. Example 2 – The expertise of an architect has been hired to build a new building for a client. The architect stamps or signs off on plans that have an error in calculation. What does a professional liability insurance cover? Even if you are not found liable, a claim can have a devastating impact on your business’ finances, your time and your reputation. This is where Professional Liability insurance becomes vital to safeguarding your business financially for the long run. If your business is sued, Professional Liability insurance covers your legal expenses, including the required legal representation and damages to the victim if awarded. Even if you not found liable, your policy will cover the related legal costs to defend your lawsuit. Professional Liability insurance will typically cover:
Professional Liability insurance does not include cover for criminal prosecution and there may be liabilities under civil laws that may not be covered in a policy. To understand the exact inclusions and exclusions of your coverage refer to your policy’s wording. Get instant quotes Disclaimer: What are not covered in professional liability?Professional liability insurance will pay the cost of legal defense against claims and payment of judgments against you, up to the limit of the policy. In general, coverage does not extend to non-financial losses or losses caused by intentional or dishonest acts.
What is an example of professional liability?Negligence or errors and omissions. Breaches of contract or failure to uphold contracted services. Serious financial damages due to alleged oversight.
What does professional and general liability cover?General liability covers physical risks, such as bodily injuries and property damage. Professional liability insurance covers more abstract risks, such as errors and omissions in the services your business provides.
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What is covered under professional liability insurance
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