What is Covered by Professional Liability Insurance?
Everyone makes mistakes, and so do businesses. One oversight can lead to thousands of dollars in costs associated with a lawsuit and/or settlement. That is why it is absolutely essential to protect yourself and your organization with robust professional liability insurance coverage. Read on for more on professional liability insurance and common mistakes it protects against.
What is Professional Liability Insurance?
Professional liability insurance is coverage for businesses that protects against claims from clients. It protects professionals against liability incurred as a result of errors and omissions that occur while performing their services. The focus of professional liability insurance is specifically on lawsuits that stem from those errors and omissions. Because torts, or wrongful acts that harm third parties, can be extremely costly, professional lines of coverage are an important way to protect any business.
Unlike a general liability insurance policy, professional lines protect against costs associated with mistakes that cause third-party financial losses. General liability covers third-party claims, such as bodily injury, physical damage, and libel. Some contracts actually require professional liability insurance, so it is important to have it in place before providing services. It can protect against current and previous work for an agreed upon timeframe and can cover employees, temporary staff, and independent contractors.
Common Coverages
Mistakes and Oversights
In business, mistakes are always possible. Anyone can forget to double-check something or make a miscalculation. Unfortunately, some mistakes can cost your client money, which might be a significant amount, depending on your industry. For example, an accountant might make some incorrect calculations regarding an organization’s financial transactions and cause some budgetary issues. This type of situation could lead to litigation, which could then lead to a hefty settlement. Since everyone makes mistakes from time to time, it is important to expect an accident and prepare yourself. By investing in professional liability insurance, you are shielding yourself and your business from costs associated with legal defense should a dissatisfied client choose to sue. It can also be used to cover other costs associated with an oversight.
Missed Deadlines
As with other kinds of mistakes, anyone can miss a deadline. Business owners often have a lot going on and remembering each and every deadline can be tough. However, sometimes missing deadlines can incur fines, fees, or other costs that your client will not want to pay, especially if the fault is yours. Professional liability coverage affords peace of mind by protecting businesses from fees or fines caused by missed deadlines.
Undelivered Services
Sometimes, events occur that render a business unable to fulfill a contract or complete a service. It is impossible to predict the future, and anything could happen at any time. For example, a construction company may agree to complete a project that needs to be completed by a certain date in order for a tenant to move in on that date. A fire could occur that causes the materials needed to complete the job to be damaged or destroyed. The owner of the property may then decide to sue over financial losses. Professional liability insurance protects companies in case they are unable to deliver services for a variety of reasons.Negligence
It is possible that a mistake or oversight could lead to an accusation of negligence. This often occurs when industry standards are not met or an error occurs that causes further problems for the client. Malpractice that results in financial harm or hardship can occur at any time, regardless of intention. Accusations of negligence can lead to a professional liability lawsuit, which can mean thousands of dollars in legal fees, court costs, attorney’s fees, and settlement expenses. It is important to make sure you are protected in case your business is sued over negligence issues
Legal Defenses
Professional liability insurance provides coverage in the event of many types of liability lawsuits. You can use your policy for defense costs regardless of fault. Businesses and services are susceptible to many different types of lawsuits in dealing with clients and/or other businesses, so having comprehensive coverage in place is essential. However, it only covers costs associated with defending against lawsuits. It does not pay for any costs related to lawsuits you initiate. For example, you would not be able to use your professional liability coverage for legal costs if you sue a client who is refusing to pay you. It also cannot be used to pay for lawsuits over client abuse.Who Needs Professional Liability Insurance?
Most professionals are eligible for professional liability insurance. If you or your company provide professional services, advice, or contract work, you should speak with an underwriter about selecting a policy. It is impossible to guarantee you will never make a mistake. This is especially true when you have a team of other people rendering services on your behalf. One mistake can cause a ripple effect that could ultimately jeopardize the future of your business, so there is no reason to take the risk of operating without protection. Businesses of all sizes can benefit from coverage. Examples of professionals who should invest in professional lines of insurance include:
• Accountants/auditors
• Architects
• Consultants
• Attorneys
• Counselors
• Community/property managers
• Engineers
• Insurance professionals
• Healthcare workers
• Medical providers
• Nonprofit directors
• Real estate agents or brokers
Contact us
If you are in need of professional liability insurance coverage, call 888-9OSPREY (888-967-7739). Our underwriters can help you select the insurance products you need to defend your business.