Professional Liability
Risk Management
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The Basics of Cyber Insurance
Mistakes are inevitable in the professional sector despite industry experience and expertise; these mistakes can be costly and threaten a company's monetary stability. Professional liability insurance, also known as errors and omissions insurance, is designed to protect professionals from financial damages arising from alleged negligence or errors in their professional services. Professional liability insurance can help cover the cost of legal fees, settlements, and judgments related to these allegations. It can also provide protection for unfair competition claims, copyright infringement claims, and other types of claims that might arise while providing professional services.
A professional liability policy benefits any business providing professional services like medical practitioners, lawyers, financial experts, architects, engineers, or real estate agents. While some states require malpractice insurance for professionals in the medical sector and lawyers, any professional services company can benefit from professional liability insurance.
Key Coverage Provisions
A professional liability policy covers financial damages caused by alleged or actual professional errors and omissions. Professional liability coverage also compensates for the defense's legal fees, the cost of running the disciplinary proceedings, revenue loss, and subpoenas. Although coverages can vary by carrier, generally, a professional liability policy provides coverage for the following:
Professional negligence - A professional liability policy can help provide coverage when a company faces legal action for failing to meet service delivery standards deliberately or accidentally, in turn, causing financial loss to the affected party.
Work mistakes and oversights - When a company mismanages information or makes professional errors in a client's business, the client may sue for financial losses due to underinvestment, missed business opportunities, or premature business transactions.
Unsatisfactory services - When a company fails to meet the quality or quantity of service specified on the contract costing their client financial loss from their failures, the policy provides legal claim payouts mandated by the court.
Missed deadlines - Missed deadlines can affect a company's ability to generate revenue. They may fail to launch a product, miss out on opportunities to make more money, or disappoint prospective buyers. Professional liability insurance enables businesses to pay their clients an amount equivalent to their loss.
What’s Typically Not Covered?
Certain types of risks are not covered by Professional liability insurance. Professional liability insurance coverage varies by carrier. It is important for professionals to understand the limitations of their coverage before entering into any agreements. By doing so, they can help to ensure that they are adequately protected in the event of a claim. Generally, a professional liability policy excludes the following:
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Bodily injury or property damage that clients suffer while you're doing business
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Acts of fraud or dishonesty
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Client discrimination or abuse litigations
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Self-initiated lawsuits. Professional liability insurance only protects against defense costs. If a company sues another party, the policy does not cover the legal fees.
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