Professional liability is a type of insurance that covers you if a client files a claim against you due to a mistake or a nasty piece of advice. Professional liability insurance is generally recommended for anyone providing services to clients.
Understanding Professional Liability Insurance
Your professional liability insurance protects your business against lawsuits arising from advice or services you offer. However, if you provide professional services to a customer, client, or another party, you risk being sued because of negligence, error, or omission on your part. In general, professional liability insurance is not part of homeowners insurance, business owners’ insurance, and in-home business policies. This insurance type pays for the cost of your defense and any damage awards. Professional liability insurance should cover individuals in professions that provide expert advice, recommendations, or a professional service to clients, customers, or other parties. Insurance companies have developed a variety of specialized forms of insurance to address the risks of particular professions and services, including:
- Accountants
- Architects
- Attorneys
- Engineers
- Providers of health care services
- Financial Services and Banking Firms
- Companies in the technology industry
As part of some professional liability policies, computer security and privacy breaches are also covered. Losses of this type are not limited to high-tech companies. Many companies consider their exposures to be primarily a result of manufacturing or selling products. Still, they are pretty surprised when they discover that outsourcing, online commerce, and intellectual property issues expose them to professional liability risks as well. Due to their complexity, a high degree of expert scrutiny is required to identify and quantify professional liability risks.
What Are The Common Types Of Claims Made And Their Benefits?
Here are a few typical examples of claims-made coverage:
- Fraudulent legal activity
- Fraudulent medical practices
- EPLI (employment practices liability insurance)
- Fraudulent acts or omissions by brokers
- directors and officers liability
- Liability for media
- Cybersecurity – includes data breaches and data protection
If you have claims-made coverage, you will be able to lower your premiums and get coverage for acts and omissions that occurred before the policy began. Among the benefits for the insurer is a greater underwriting risk that allows them to lower prices.
The Wording Of a Professional Liability Policy
Professional liability policies are different depending on the company. In several cases, policy wordings are designed to meet a stated minimum requirement, making them easier to compare, but the coverage they provide differs substantially in other cases. It would include a breach of duty if the policyholder reported the incident to the insurer during the policy period. Non-lawyers may find it difficult to distinguish between legal terms with significant differences. For example, “negligent act, error, or omission” indemnifies policyholders against loss/circumstances arising solely from professional errors or omissions. However, a more restrictive policy denies coverage to a lawsuit alleging negligent acts, negligence errors, or negligence omissions.
Professional Liability Insurance Example
Professional liability insurance includes, among other things, medical malpractice insurance. Professionals in the medical field face the not inconsiderable threat of lawsuits for alleged malpractice, which is a medical provider’s act or omission that results in patient injury or death. Medical malpractice insurance can help providers offset the cost of such lawsuits, even though most medical malpractice cases are treated as civil torts.
