Professional Liability Insurance
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PROFESSIONAL LIABILITY INSURANCE

Introduction: Professional Liability

Introduction: Professional Liability

Professional Liability Insurance, also called Professional Indemnity, Malpractice, or Errors and Omissions (E&O) Insurance, covers professionals and small businesses when someone files a civil lawsuit against them. It protects against claims of negligence, misrepresentation, and malpractice.

What is Professional Liability Insurance?

What is Professional Liability Insurance?

Professional Liability covers your client when someone claims they were negligent when providing a product or professional service. For example, an unsatisfied customer might allege they experienced a financial loss because your client..

  • Failed to provide a promised service.
  • Delivered inferior or incomplete products.
  • Was careless or neglectful when providing professional services.
  • Made errors when providing a service or product.

For example, say your client owns a messenger service. A customer hires the company to deliver contracts but fails to do so, causing the customer to lose business. If the customer sues your client for negligence, Professional Liability Insurance covers the costs associated with the claim (e.g., attorney fees, court costs, and settlements or judgments), even if the lawsuit is meritless.

As you may know, Professional Liability Insurance offers different protection than General Liability and Employment Practices Liability Insurance. Though both these policies cover certain lawsuits, Professional Liability is the only policy that covers claims involving negligence, misrepresentation, inaccurate advice, and violations of good faith and fair dealing.

Who Needs Professional Liability Insurance?

Who Needs Professional Liability Insurance?

Some professions, such as doctors and lawyers, are required by state laws to carry Professional Liability coverage. However, any of your clients who provide services or advice to customers should invest in this product. From accountants to wedding planners, small-business owners of all walks can face civil lawsuits over professional negligence.

Important Facts about E and O Insurance

Important Facts about E and O Insurance

Professional Liability is an important product for your clients to carry, and knowing some key details will help you serve them better.

Professional Liability Insurance is "Claims-Made" Coverage

Professional Liability Insurance is offered on a "claims-made" basis. As you probably know, this means your client's policy must be active both when the incident occurred and when the claim is filed to receive coverage. The exception is when a policy has a retroactive date, which allows coverage for an incident that happened before the policy was in force.

Because a break in coverage can leave your client unprotected for past events, many of your clients will want to keep their policy throughout the life of their business. If a client needs to cancel their policy, you might recommend they purchase limited coverage to protect them from claims not yet filed.

Professional Liability Protection Doesn't Cover Everything

No policy covers everything, but there are two important types of claims that many Professional Liability policies don't address. The first is anything involving criminal prosecution. Professional Liability focuses solely on civil suits. The second is cyber liability, which includes technology issues and data breaches. If your client specializes in the IT field, recommend that they add Cyber Liability Insurance to their policy.