Professional Liability Insurance

Professional Liability Insurance (also known as Errors & Omissions Coverage) covers a wide range of professionals who make their living from their unique professional expertise.

Who needs Professional Liability Insurance?

Graphic Designers, Engineers, LawyersDoctorsArchitectsIT ProfessionalsReal Estate Brokers, and Consultants are just some of the professions who need to be properly covered by Professional Liability Insurance.

If you’re in one of those professions and/or your business relies on your professional expertise, you are expected to have a certain level of training in your industry or field. Your services and/or advice must meet standards set by your state, industry, and/or written client contracts and agreements.

Failure to meet these standards could result in a substantial financial loss for your client(s), resulting in a significant lawsuit. This is where Professional Liability Insurance becomes very important. 

How does Professional Liability Insurance work and what does it cover?

Professional Liability Insurance triggers in a few different situations:

  • You make a mistake that costs your client(s) money
  • Undelivered results/services
  • Negligent services

We All Make Mistakes

No matter how careful you are, making mistakes is a fact of life. After all, we are human. If one of these work mistakes causes a financial loss for one of your clients, it could be problematic for your business. Professional Liability would kick in if one of your clients initiates a lawsuit against you as a result of your mistake.

Undelivered Results or Services

Sometimes the product/service you describe in your client contracts just doesn’t work the way it was represented to the client. Should that happen, and you get sued, Professional Liability Insurance would apply. For example, a business consultant recommends you buy a high priced piece of equipment based on high income projections and those projections end up being way off, resulting in a financial loss for the client. That client can actually sue to make up those losses and cite their contract for support.

Negligent Services

Your expertise can sometimes be a double-edged sword. It can help you earn clients, but it can also set really high expectations. For example, architects have the skill and education to design buildings that both meet client demands and comply with building codes. But let’s say an architect makes an oversight that compromises a building’s safety. The building owner can sue for negligence.

Unfortunately, negligence suits can be pricey. A court may award the client damages, but it can also monetarily punish you to deter future recklessness.

What is Next?

Keep in mind that Professional Liability only covers the financial losses suffered by clients and/or third parties, as opposed to bodily injury and property damage claims. This is because the latter two types of loss are typically covered under commercial general liability policies. 

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