Professional liability insurance is a type of insurance coverage that protects professionals from legal fees and damages that may be owed in the event that a claim is filed against your business. Claims can be the result of negligence, errors, failure to provide work as stated in a contract and more. It is essential for nearly any professional today.
Unfortunately, many professionals feel that they do not need professional liability insurance. This misconception can exist because the business owner is an independent contractor and they don’t realize that they can be sued. It can exist because the business owner only has a small business. It can exist because the business owner does not feel there is any risk for litigation because they do not provide a product or have a building. Yet, every day, small business owners, independent contractors, consultants and other professionals are sued for mistakes or perceived mistakes.
The Consequences of Leaving Your Business Unprotected
If a client or customer believes that they have been wronged or injured by you, your business, your service, your product or your employees, then they can file a claim. Without insurance, you are responsible for all legal fees and damages owed to the client or customer – neither of which are inexpensive. Both business and personal assets can be awarded to the client if you do not have sufficient protection from litigation procedures. This, of course, can lead to financial ruin.
When the Claim is Unfounded
Not all claims against a business are true. Some people are just looking for someone to sue for something and they may even make up claims against your business. If the claims are unfounded, you do not have to pay for damages, but you still have to pay for the legal fees that were used during court proceedings. This cost alone can mean financial ruin for small businesses or self-employed individuals.
Aren’t You Protected with General Liability Insurance?
If you are like many businesses and business owners, you may think that your general liability insurance protects you against all claims relating to your business. This is the most common misconception about professional liability insurance and it is, unfortunately, one of the most costly.
General liability insurance does not cover errors, mistakes, failure to meet contract terms, malpractice or other types of professional mistakes. These types of claims are only covered under professional liability insurance. As such, if you are a professional that offers advice or provides a service, you should consider obtaining professional liability insurance.
Types of Professional Liability Insurance
No two businesses are the same. As such, there are many different types of professional liability insurance to help ensure that each professional can obtain a policy that is best suited for their business. Types of professional liability insurance include:
- EPLI (Employment Practices Liability Insurance): This type of professional liability insurance is designed to protect businesses from claims that may be made by former, future or current employees relating to discrimination, sexual harassment, wrongful termination or other types of employment-related claims.
- D&O (Directors and Officers) Liability Insurance: Directors and officers of a business may face legal action if an investor, customer or employee feels that they have failed to meet their assigned duties. Claims can be filed in relation to a conflict of interest, fraud and hiring or firing practices.
- E&O (Errors and Omissions) Liability Insurance: Errors and omissions liability insurance is designed to protect businesses from claims that related to mistakes or errors in work or services.
- Group Personal Excess Liability Insurance: Group personal excess liability insurance extends further than just the business. The company, its managers, officers, employees and volunteers are also covered. One example of group personal excess liability insurance would be a doctor’s office that insures their staff and themselves against any legal claims made.
How to Obtain Professional Liability Insurance
The first step to obtaining professional liability insurance is contacting an insurance company. With the insurance underwriter, you can discuss your business, your risks and the type of coverage you think you need. Limits and exclusions should be discussed thoroughly because these items can limit the amount of protection you have for your business. You can also talk to your underwriter about ways to decrease your professional liability insurance policy.
When Professional Liability Insurance Still Isn’t Enough
Depending on the type of business you have, you may find that professional liability insurance isn’t enough to cover every aspect of your business. In these instances, it is best to find a company that offers a wide range of insurance policies to their customers. Some of these companies may offer discounts for obtaining multiple policies with their company. Again, make sure that you take the time to speak with your insurance underwriter about your business and its risks so that you can be protected against the most common claims for your line of business.