What is Professional Liability Insurance?

Professional liability coverage is a business insurance type frequently called Errors and Omissions Insurance or E&O Insurance. In certain industries, it's called malpractice coverage. In some regions of the world, it's known as Professional Indemnity Insurance. It protects professionals against claims resulting from:

• Alleged or actual negligence (errors made while working)

• Missed deadlines or undelivered services

• Breach of nondisclosure or copyright infringement

• Giving incorrect advice to clients

• Claims of libel or slander

• Data breaches

Professional liability coverage protects you when a client alleges your services caused a financial loss due to the professional services you provide. Professional liability insurance pays your defense expenses, such as hiring legal counsel and paying the fees, court expenses, and settlements.

Who Needs Professional Liability Insurance Coverage

When you provide professional services or offer professional advice or recommendations to clients, you require professional liability coverage. Some occupations are even legally mandated to secure liability insurance, such as attorneys and physicians. Here are additional professions that should evaluate this policy type:

• Accounting and Auditing

• Advertising

• Application Developers

• Architects & Engineers

• Computer Programmers

• Consultants

• Database Engineers

• Education

• Home Healthcare Providers

• Finance

• Graphic Design

• Internet Services

• Independent Contractors

• IT Consulting

• Photography

• Professional Services

• Project Management

• Real Estate Agents

• Software Developers

• Technology

• Therapists

• Web Design Services

• Web Developers

Professional Liability Insurance for the Medical Industry

For doctors, nurses, dentists, and chiropractors, and others in medical professions, professional liability coverage is usually called malpractice insurance. Professionals who perform medical testing and laboratory work also fall into this category. Since the risk of bodily injury is so significant in these professions, you really cannot forgo professional liability insurance protection.

Professional Liability Insurance for Consultants

Other occupations like insurance adjusters, realtors, appraisers, and consultants might purchase another form of Professional Liability Insurance known as Errors and Omissions coverage (E&O) to shield them from actual or alleged mistakes.

Professional Liability for the Technology Industry

Professional liability protection is frequently written specifically for the industry where it is being placed. For example, with expansion in the technology sector, technology companies, developers, website hosts, creators, and software development might all have protection written specifically for their business type. Additional protection such as personal injury, a data breach, a breach of warranty, intellectual property, and other coverage types can be added to any business providing services or offering advice and opinions for enhanced protection.

Why You Need a Professional Liability Insurance Policy

No business operator expects they will make errors and not have the customer's best interests in mind. However, mistakes occur—even to the most careful professionals. Having a professional liability insurance policy ensures financial security against claims of mistakes, negligence, or professional errors that could result in lawsuits. You also need to remember that anyone can allege anything against you and your business. The suit might have little connection to you, but even being remotely involved exposes you to being sued. Unfortunately, sometimes in the litigious society we live in, you might be sued for something you didn't do.

Regardless of whether you or your business is negligent or not, it frequently takes months—even years—to resolve this lawsuit type. Even when you and your business are exonerated and found not guilty, the defense expenses can be enormous. When there is an award against you, that can be a staggering amount. One major lawsuit can frequently cripple your business. Professional liability coverage will relieve this burden and allow you to continue running your business during a lawsuit.

What Does Professional Liability Insurance Cover?

To help you better understand why a professional liability policy is essential, here are some examples:

Example #1: You run a consulting firm and provide professional advice as part of your service offerings. You make a recommendation to a small business that they implement incorrectly. Nonetheless, they find you responsible for the income loss that was incurred and sue you. Even though you don't believe you are liable, professional liability coverage will help pay your defense expenses.

Example #2: You are a web designer creating a new website for a client. When you initially deliver the project, the client is satisfied with the results. However, shortly after, the client's website is hacked and protected client information is compromised. You are sued for negligence and they claim you made an error. Professional liability coverage steps in and pays the defense cost, proposed settlement, and possibly the cost of credit monitoring for those affected by the breach.

Example #3: You're a real estate agent and helped a client find their dream house. However, the day the new homeowners moved in, a pipe burst and flooded the home. They blame you for steering them in the wrong direction and sue you to pay repair costs. However, you have written in their contract that they waived a home inspection, and you aren't liable—which will be proven in court. However, professional liability coverage will help you pay defense costs.

Example #4: As an accountant, you regularly work with your customers to do bookkeeping tasks and handle their finances. A client discovers errors you made that cost them money. Professional liability coverage steps in to pay the damage cost and any legal defense or court expenses incurred rectifying your errors.

General Liability Insurance Vs Professional Liability Insurance

We are frequently asked, "What is the difference between general liability and professional liability coverage?"

When examining business insurance, remember that the types of risks businesses face can be substantial. So can the expenses associated with these risk types. Not only are you insuring the risk of your business, its property, and employees—but those who interact with your business and employees. A general liability insurance policy can protect against these risks.

A general liability insurance policy typically protects against claims of bodily injury, personal injury, or property damage sustained by third parties. General liability protection pays the legal fees and expenses associated with your legal costs, settlements, and property damages.

Professional liability coverage protects against negligence as it relates to providing professional services. Generally—although not always—it is a claim involving financial damages, versus a claim of bodily injury against your business. Typically, this liability protection type applies to professions where there is a professional code of conduct or standards which are used as a measure for evaluating how your services should be judged. Naturally, this is all subject to interpretation and is usually determined through the courts.

With either general liability protection or professional liability protection, one claim can be financially devastating to a business. Sometimes damages and injuries are real and need to be addressed. Other times, lawsuits can be baseless and frivolous. Regardless, you need to be prepared for either occurrence. Work with your licensed insurance professional to determine if a professional liability insurance policy, a general liability insurance policy—or both—is necessary for your business.

How Much Does Professional Liability Insurance Cost?

Progressive lists their average monthly cost for professional liability coverage as $46 a month ($552 a year). Professional liability insurance cost(s) will vary widely per the industry that you're in and includes other factors such as:

• The location of your business

• The number of employees you hire

• The number of years you've been in business

• Whether or not you have a claims history

• Even your credit score is factored in

Professional liability insurance expenses also vary due to the insurance carrier, deductibles, and coverage limits you choose. Typically these policies have coverage limits that are issued in million-dollar increments and the deductibles range from $1,000–$25,000 per claim. A million-dollar limit might sound like a lot, but these claims often start even higher. To learn more about what impacts the cost of professional liability coverage, check out our guide to protection for professional liability.

Understanding Retroactive Coverage versus a claims-made policy

A professional liability policy is typically sold on a claims-made basis. It means that when a claim is brought against you or your business, the professional service must have been completed during the time period you had active professional liability protection. When you are seeking a new policy, you can add retroactive protection with some insurance carriers. So when a claim is filed for work completed before the policy becomes active (or after it expires), it can be covered.

When you cancel your insurance policy, it is imperative to have requested and received an extended reporting period. Otherwise, when you canceled the policy and later a claim was filed against your company, even though protection was in place at the time of the event, the event will not be covered. Because of this, it is important to understand all the terms and definitions listed in your policy.

Get a Free Quote for Professional Liability Insurance

Let us help you find protection for your business and maintain your peace of mind. At Tivly, our goal is to get you an affordable business insurance quote. To get a competitive professional liability insurance quote, simply complete the quote form at the page top and one of our agents will reach out to you. Or you can call us at +1 (470) 410-0093 . When you need professional liability coverage, we can help you get what you need in a few simple steps. Protect your business today with coverage for professional liability.