Lawyers, Accountants, Physicians

Unfortunately, even experienced experts in their field make mistakes. Some can even result in a financial loss for someone you service. In some cases, a customer or client who suffered a loss due to even an honest error on your part might still sue you.

In a scenario like this, professional liability insurance helps cover your business and yourself against the losses incurred by the error. Sometimes referred to as “Errors & Omissions Insurance or E&O it serves as professional indemnity insurance against all losses, regardless of intent.

What Can Professional Liability Insurance Cover?

Professional Liability insurance can help professionals, independent contractors, and third-party agencies with some of the following things.

Negligence: Which is defined as failure to use reasonable care, resulting in damage or injury to another person or property.

Misrepresentation: Which is often construed as making an untrue or misleading statement of fact during the course of professional negotiations. Especially if that statement then induces that other party to enter into a contract. In many of these cases the misled party or company might choose to rescind the contract or seek payment for damages and financial losses related to the misleading information.

Inaccurate Advice: This can occur when inaccuracies in information lead a client or customer to make the wrong decision. It is more common with consultancies, but can also be seen as an umbrella for other instances where negligence and misrepresentation don’t clearly apply.

Even if your errors are unintentional the affected customer or client can still potentially sue your business to recoup losses. If you don’t have professional liability coverage, you most likely will have to pay expensive legal defense costs directly out of pocket or as part of a settlement.

What Doesn’t Professional Liability Insurance Cover?

You should also bear in mind that professional liability insurance doesn’t cover everything. It is not blanket or umbrella coverage for all professional errors. This includes:

Bodily Injury & Property Damage: This is covered under general liability insurance to help cover costs if someone is injured on your business premises or you damage another’s property.

Work-Related Injuries & Illnesses: Should an employee get sick or is injured on the job, you will need to file a workers’ compensation claim to help them recover before they can return to work.

Breach of Data: This is covered under a cyber insurance policy and is applicable if your business loses confidential or sensitive information about your clients and customers.

Other Ways Professional Liability Insurance Helps Businesses

There are several other ways that professional liability insurance helps businesses of every size to protect themselves from financial losses and liability issues. This includes some of the following examples.

  • Accounting errors
  • Failure to meet timed deliveries
  • Logistical errors
  • Zoning law failures
  • Failure to inform

How Does Professional Liability Insurance Work?

Most insurance providers address a professional liability insurance policy on a “Claims-Made” basis which includes a retroactive date as well as an extended reporting period.

Who Needs Professional Liability Insurance?

Some states require businesses in specific industries to carry some level of professional liability insurance as part of licensing their business. Though even if you aren’t required to carry coverage as a matter of law, it is still a good idea to have a Professional Liability Insurance policy if your business engages in some of the following things:

  • Offering professional services directly to customers
  • Providing expert consulting services
  • Regularly advise your clients as part of a contract.

You should also note that many third-party business contracts include underwriter language that requires professional liability insurance coverage and requires proof of coverage before the contract can be signed or activated.