First in Protecting, Your Profession.
What Is Professional Liability Insurance?
Almost everyone has heard of medical malpractice insurance, but professional liability insurance is not as well-known. The exact definition of professional liability insurance varies depending on the professional being insured; but in general, it protects you against “errors and omissions” that occur when rendering professional services. Basically, it safeguards you against mistakes or negligence that result in a financial loss for your client. It differs from a general liability policy, which is designed to cover bodily injury and property damage claims.
Professional liability insurance covers the cost of legal defense and any judgments or settlements up to the policy limits. Lawsuits can be extremely costly, with damages running into the hundreds of thousands of dollars in a major suit.
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What Does Professional Liability Insurance Cover?
Professional liability insurance goes by a number of different names and can be applied to a wide variety of professions. Here are three of the more common types of professional liability insurance:
- Malpractice insurance: This coverage is designed especially for medical professionals. It protects against suits that allege negligence or mistakes. Anyone working in the healthcare field should consider a malpractice policy.
- Errors and omissions liability insurance (E&O insurance): This type of coverage is ideal for lawyers, consultants, real estate agents, stock brokers, insurance agents, designers, architects and others. These professionals offer their advice and knowledge to earn a living. Clients who act on that advice, whether it be buying a certain type of insurance or purchasing a particular stock, are at risk and may feel that the service provided resulted in a financial loss.
- Directors and officers liability insurance (D&O insurance): This coverage is specific to high-ranking executives in a company. It handles a variety of circumstances, including unlawful acts, poor investment decisions, the release of confidential information, issues with hiring and firing, gross negligence, conflicts of interest, and other errors.
Professional liability insurance comes in two different flavors, claims-made and occurrence. A claims-made policy must be in effect not only when a lawsuit is filed, but also when the incident that prompted the lawsuit took place. This is the most common type of policy and is usually cheaper.
Occurrence coverage covers any incident that takes place during the coverage period, even if the suit is filed after the policy has expired. These policies provide more comprehensive coverage, but tend to be expensive.
Following are a few tips to help prevent lawsuits:
- Be careful: When talking to clients or the public, avoid statements or activities that could be construed as questionable. Improper actions and statements can quickly lead to a lawsuit.
- Find a great lawyer: Make sure you have a lawyer who can advise you on what to say and do if you are sued. Contact them immediately, before making any statements, and trust their advice.
- Protect your data: Protecting your customer data is key. A data loss can lead to legal action from customers or suppliers.
Why Should I Get Professional Liability Insurance?
Just about any professional can be sued these days. Professionals of all types can benefit from the protection of professional liability insurance. If you are concerned that your company may not support you during a lawsuit, you will want to protect yourself with individual professional liability insurance. For example, if for any reason there is a conflict of interest, your company’s insurance policy won’t provide coverage. The costs of legal defense and possible settlements or judgments may then be taken from your personal financial assets.