Certain individuals and companies that provide professional services to their clients need specialty liability coverage called professional liability insurance, or errors and omissions (E&O) insurance. “Professionals” are considered to be those who have special knowledge or skill in a certain area, and who use that skill to provide advice and services to others.
Traditionally, doctors, lawyers, architects, engineers and accountants were considered to be “professionals” for insurance purposes. But now, as lawsuits related to allegedly faulty business services are commonplace, professional liability insurance is becoming equally important for a wide variety of professions. Today, errors and omissions coverage is just as important for advertising and PR firms, Internet service providers, Web hosting companies and many other types of firms. In addition, it is not unusual for actuaries, real estate agents, insurance agents, appraisers, mortgage and securities brokers, business consultants and many other types of professionals to carry errors and omissions insurance.
What Does Professional Liability Insurance Cover?
Professional liability insurance provides coverage for professionals, their partners, their employees and the partnership or corporation for damages caused by providing or failing to provide professional services. Professional services firms can be sued for providing erroneous advice, making errors in the services they provide, or even if a client loses money due to an act of negligence or an omission on the part of the professional. If you are in the position of providing professional advice and services, errors and omissions insurance protects you in cases of actual or alleged errors, loss of client data, negligent oversell, system failure or making misleading statements.
Professional liability policies will cover the costs associated with your legal defense if you are sued, as well as any judgments that are rendered against you or settlements that you must pay. Most errors and omissions policies can be customized for your particular area of expertise and the risks you face.
Remember that your commercial general liability policy will not provide coverage for lawsuits related to professional liability issues. Professional liability policies also have certain coverage exclusions, including:
- Criminal, fraudulent or malicious acts
- Bodily injury and property damage (except in the case of medical malpractice insurance and E&O for certain design professionals)
- Workers’ compensation claims
- Punitive damages
Professional liability policies and their exclusions will vary depending upon your profession and your insurance carrier. It is important to remember that ultimately, E&O coverage is designed to protect you from liability claims that are directly related to the provision of professional services and any resulting financial loss for a client. Losses that are covered under some other type of insurance policy—e.g., general liability, automobile, property, or workers’ compensation claims–are not covered by professional liability insurance. You need to make sure you have coverage for ALL of these types of concerns, and it may mean having numerous business insurance policies to make sure that all of the bases are covered.
Do you provide any type of professional services to clients that could result in financial loss for them? Do not take your need for professional liability coverage lightly. Contact us today so we can help you assess your risks and your need for coverage.
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