Professional Liability Coverage
Professional liability coverage helps protect your business if you make a mistake when rendering your professional services. Even if you didn’t do anything wrong, your client can sue your business if they believe you to be negligent while performing your professional services. Without professional liability insurance, you could be stuck paying expensive legal fees out of pocket.
FAQs
What does professional liability cover?
Professional liability coverage is designed to protect your business against actual or alleged errors made in the course of providing professional services. Negligence, inaccurate advice, malpractice and misrepresentation are common scenarios that can result in lawsuits. You could be sued by a client if you did something you shouldn’t have or if you don’t do something you should have while providing professional services. Defending yourself against such allegations can be extremely costly, which is why many professional liability policies provide coverage for defense costs.
What are some examples of claims scenarios?
- An engineer is sued by a client for making a mistake in their engineering plans that led to a burst pipe and severe water damage
- A medical billing employee is sued for incorrectly coding a medical procedure for insurance purposes
- Your accounting firm makes a clerical mistake that costs your client thousands of dollars
- An insurance agent fails to offer their client a necessary insurance coverage and is sued
- A real estate agent sells a piece of property to a client and advises them that it is zoned for commercial use but this proves to be untrue and the client sues
What doesn’t professional liability cover?
It’s important to remember that insurance doesn’t cover everything. Professional liability is not meant to cover the following:
- Bodily injury or property damage exposures are covered by a general liability policy
- Data breach losses are covered by a cyber liability policy
- Fraudulent, dishonest or criminal acts are excluded from most insurance coverages
- Employment matters would be covered by a workers compensation or employment practices liability policy
What types of businesses need professional liability coverage?
There are many types of businesses that need the protection professional liability insurance offers. You may be required to carry this coverage by your state or to be compliant with the terms of a contract. In particular, if your business requires a professional license, professional liability is essential to protect you from the risks you face when providing professional services. It’s important to note that general liability policies do not offer protection against professional practices claims. Some examples of professions that should have this coverage include:
- Lawyers
- Architects
- Engineers
- Accountants
- Health care professionals
- Real estate agents
- Insurance agents
How does professional liability insurance work?
Professional liability policies are usually written on a claims-made basis, meaning that coverage is valid only for claims that occurred and were reported during the policy period. This means that if a policy is canceled and a claim is reported after cancelation, the claim will not be covered even if it occurred during a coverage period. Incidents that occurred prior to coverage being in place might not be covered, although some policies include a retroactive date that grants coverage back to a specific date. Extended reporting coverage, often called “tail coverage,” can be purchased after a policy has been terminated to protect the insured from past incidents.
What does professional liability coverage cost?
The cost of professional liability insurance is impacted by the type of industry you’re in, the size of your business, the location of your business and the coverage limits you need.