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What Is Professional Liability Insurance?

If you are looking for a professional liability insurance definition, you will find that it is slightly different depending upon your profession. For example, a private practice physician's professional liability coverage will be geared toward the risks of the medical profession, whereas a realtor's concerns are related to buying and selling homes. However, it is essentially defined as legal protection from "errors and omissions" that may occur as a result of performing professional services. This means it will cover you for mistakes you make as well as your negligence – things you fail to do – that result in a client's loss.

In practice, it means that if a client claims that your services, advice, or expertise have caused a personal or professional loss, you have insurance that will cover your legal defense and the costs associated with resolving a lawsuit. Litigation can be a drawn-out process that can cost hundreds of thousands of dollars.

Professional liability insurance is a reliable way to protect your business assets. If you’re sued, professional liability insurance coverage helps pay for defense costs as well as any settlements or judgments that you must pay.


Who Needs Professional Liability Insurance?

This form of business insurance appears under a variety of names because of the many different types of professions that need this type of coverage. Anyone from a home remodeler to a heart surgeon should consider purchasing professional liability insurance coverage.

A few specific types of this insurance are:

  • Malpractice insurance: This is specifically designed to assist medical professionals accused of negligent behavior or mistakes. Everyone working in the healthcare and medical fields should evaluate whether this is a necessary coverage or not. Even if you are a health professional who is employed within a clinic or hospital that has its own malpractice insurance, it is a good idea to evaluate personal malpractice coverage for your own protection.
  • Errors and omissions liability insurance: Professionals who buy errors and omissions insurance include consultants, lawyers, brokers, financial advisers, real estate agents, architects, designers and even insurance agents. These professions are based on knowledge and advice; those who act on that advice are at risk in one way or another and may deem that the services you provided resulted in injury, damage or loss.
  • Directors’ and officers’ liability insurance: This type of coverage specifically deals with any negligent behavior or errors committed by top ranking company employees.

Others that may want to consider professional liability coverage include engineers, dentists, not for profit organizations, contractors and transportation businesses.


Why Do I Need Professional Liability Insurance?

The most important reason to have the protection of professional liability insurance is unforeseen claims against you. If for any reason a client or patient feels wronged or harmed by your services, you can be at risk of a lawsuit. If you are covered by a reliable professional liability insurance company, and have set a coverage amount that is adequate for the risks you face, your personal assets are protected.

Another important reason why you may need individual professional liability insurance is if you are concerned that your company may not support you during the legal process. 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 settlement or judgment may then be taken from your personal financial assets.

If you maintain a standard of excellence within your business operations, you may feel that the extra cost for professional liability insurance isn’t worth the expense. However, service providers are often blindsided by lawsuits can bankrupt them or their company. A member agent in the Trusted Choice network can certainly help you to assess your needs and risks.


Examples of Professional Liability Insurance Claims

Professional liability claims range from simple errors to major snafus. For example:

  • A commercial client hires a design firm to design an office building to specification, including space for specialty equipment and existing office furniture. When the project is complete, the client company discovers that the existing furniture and equipment will not fit into the space, and they must pay an additional $30,000 to retrofit the space. The result is a claim against the design firm.
  • A firm hires a marketing company to produce an ad campaign, and is sued by another corporation for copyright infringement. The client firm, in turn, sues the marketing company for the cost involved in the legal process as well as for damages to their reputation.
  • A real estate agent fails to disclose a known problem or defect in a property, such as a problem with mold or radon. The home buyer learns of the problem after the sale is complete, and sues the agent for not disclosing the problem and for the additional costs involved in remediation.
  • A surgeon removes the wrong kidney; or, the surgeon recommends a surgery which the patient later learns is not beneficial and can even be life threatening.

Find Affordable Professional Liability Insurance

The cost of professional liability coverage will vary widely depending on your profession and your risks. A sole proprietor who installs cabinetry may not face as large of a potential risk as a brain surgeon, but both professions need coverage. Other factors include the frequency of claims in your industry, the size of your company, and whether you’ve had liability claims in the past. Professional liability insurance costs can vary from $500 to $15,000 per year, depending on the type of work you do.

To get an accurate professional liability insurance quote, contact us as we offer many carriers so you can protect yourself from professional liability claims.

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