Professional Liability
Professional liability insurance is designed for businesses that make a living off their expertise. Even the most experienced and thorough professional service provider makes mistakes. Unfortunately, clients may not be so understanding if your error costs them considerable time or revenue.
Professional liability insurance helps protect you from lawsuits filed by unsatisfied clients.
For example, if you miss a project deadline, make an omission in your work, or provide ineffective business advice, your client may sue you.
If you’re served with this type of lawsuit, your professional liability insurance policy will cover legal defense costs up to your policy limit.
When a dissatisfied client sues over a mistake made by your business, professional liability insurance can help cover the cost of legal defense, including the cost of hiring a lawyer.
Specifically, professional liability insurance will help provide coverage for:
Work mistakes and oversights
Sometimes a simple mistake can cause one of your clients to lose money. When a client sues over an error made by your business, professional liability insurance can help pay for your legal defense expenses and more.
Undelivered services
If your business promises to provide a service and fails to deliver, the client could choose to sue you. This may be even more likely if the client believes that your work negatively impacted their bottom line.
Accusations of negligence
When a client hires you based on your specialized skills, they are entitled to a reasonable standard of care. If your work fails to meet industry standards or causes financial damage to a customer, your business can be accused of professional negligence and could face a professional liability lawsuit.
Missed deadlines
If you or an employee at your small business misses a deadline, it may have tremendous repercussions for your client. Professional liability provides protection for your small business if a client sues over late work
While professional liability insurance covers many aspects related to legal action from a client, it does have a number of coverage exclusions. For example, it only covers the cost of defending against lawsuits – it doesn’t pay for lawsuits you initiate.
Unless your policy has prior acts coverage, it will only cover any claims filed while the policy is active and for incidents that occurred after you bought the policy. In this case, endorsements can fill gaps in your professional liability coverage.
Other exclusions from professional liability insurance coverage include:
- Customer injuries or property damage
If a customer is injured on your premises or you accidentally damage a customer’s property, general liability insurance can help pay for medical expenses or the cost of repairing or replacing the damaged item. It can also cover legal expenses if the customer sues.
- Employee injuries
Workers’ compensation insurance will cover medical expenses and partial lost wages for employees with work-related injuries or illnesses.
- Employee discrimination lawsuits
Employment practices liability insurance (EPLI) will cover lawsuit expenses related to claims of harassment, discrimination, and wrongful termination.
- Damage to business property
The property coverage included in a business owner’s policy (BOP) can pay for items that are damaged, destroyed, stolen, or lost.
- Vehicles used by a business
Business-owned vehicles must be covered by commercial auto insurance. Personal or leased vehicles used by a business should be covered by hired and non-owned auto insurance.
- Contingent bodily injury
Professional liability insurance benefits a variety of industries that provide services directly to a client or customer. It is designed for both businesses and independent contractors that make a living off of their expertise in these industries.
However, there are a few specific professions who need professional liability coverage more often than others, including:
- Accountants and Auditors
- Consultants
- Engineers
- Healthcare Professionals
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