PROFESSIONAL LIABILITY INSURANCE
What is Professional Liability Insurance?
Professional liability insurance, also called errors and omissions insurance (E & O insurance), protects your business if you are sued for negligence, even if you haven't made a mistake. Professional liability insurance (PLI) is insurance that protects professionals such as accountants, lawyers, and physicians against negligence and other claims initiated by their clients.
Defending your business can be financially crippling. If a covered claim is brought against you, such coverage will immediately defend you and possible appoint an attorney if necessary. If damages are awarded, the E&O insurance carrier will pay them up to your covered limit.
Who needs Professional Liability Insurance?
You may feel confident in the quality of your work, but any business can be sued for negligence when its work doesn't meet a client's expectations. If you’re a consultant or a small professional business, buying liability insurance is the right thing to do.
You should seriously consider professional liability insurance if your business:
- Provides a professional service.
- Regularly gives advice to clients.
- Is requested by a client to have professional liability insurance to complete a contract.
How Professional Liability Insurance Works
Depending on the profession, professional liability insurance may have different names, such as medical malpractice insurance for the medical profession, and errors & omissions insurance for real estate agents. Professional liability insurance policies are usually arranged on a claims-made basis, which means coverage is good only for claims made during the policy period. Typical professional liability policies will indemnify the insured against loss arising from any claim or claims made during the policy period by reason of any covered error, omission or negligent act committed in the conduct of the insured's professional business during the policy period.
What Professional Liability Insurance Does Not Include
Coverage does not include criminal prosecution, nor all forms of legal liability under civil law, only those listed in the policy. Cyber liability, covering data breach and other technology issues, may not necessarily be included in core policies. However, insurance that covers data security and other technology security-related issues is available as a separate policy.
Example of Professional Liability Insurance
Medical malpractice insurance is a common example of a type of professional liability insurance. Medical professionals do their work under the not inconsiderable threat of facing lawsuits for alleged medical malpractice, which is defined as an act or omission by a medical provider in which he or she provides treatment that falls below the standard of care, resulting in injury to or the death of the patient. While most medical malpractice cases are treated as civil torts in the United States, medical malpractice insurance can offset the cost of such lawsuits to providers.