Professional Liability Insurance – Errors and Omissions

Why Your Client Relationship May Cost You More Than a Cup of Joe

As a busy professional, one of your first priorities is developing strong relationships with your customers, clients, and vendors to ensure the success of your projects. During the process you and your team may offer advice and provide professional services within a specific expertise. Despite your best intentions, mistakes and errors may and can occur, leaving your business exposed to costly liability litigation. And, even if you did nothing wrong, the cost of defending yourself can be extremely expensive. While you probably already have a general insurance policy in place, a good risk-management business plan will also include professional liability insurance – a good E&O policy will also cover the cost of defending yourself.

What is Professional Liability Insurance?

Professional Liability Insurance, sometimes known as Errors & Omissions or Professional Negligence Protection, can be defined as: Insurance that protects professional service providers such as accountants, consultants, coaches, lawyers and physicians against negligence and other claims initiated by their clients. It is required by professionals who have expertise in a specific area because general liability insurance policies do not offer protection against claims arising out of business or professional practices such as negligence, malpractice or misrepresentation. (Source: Investopedia.com)

Professional liability insurance takes on different names depending on the profession. For example, with respect to medical professions it is called malpractice insurance, while errors and omissions (E&O) insurance is used by insurance agents, consultants, and lawyers.

What Does Professional Liability Insurance Cover?

Although insurance policies differ, in general, a policy covers actual or alleged negligence in the performance of professional services. Failure to meet industry standard of care could trigger a professional negligence insurance claim.   It’s important to know which professional services you’re covered to perform. Professional liability insurance cover:

Negligence: This refers to any alleged mistakes or advice a company makes through professional services provided

Defense costs: Law suits against a company regardless of fault

Services previously performed: Cover businesses for services completed (up to an agreed time frame)

Claims of personal damage caused: If someone accuses you of defamation or slander, your business is covered by this policy

What Professions Need Negligence Insurance Protection?

Professionals who are expected to have extensive technical knowledge or training in their particular area of expertise. Your insurance company is the best source for determining your business liability insurance needs, but here’s a general list of specialized fields typically covered:

  • Legal
  • Medical
  • Dental
  • Construction
  • Real Estate
  • Engineers
  • Financial Services
  • Insurance
  • Consultants
  • Some charities and non-profit organizations

Examples of Potential Professional Liability Claims

  • An engineer miscalculates the load bearing weight of a balcony. After 4 years of use, the structure collapses.
  • A home inspector fails to see a crack in the drain pipe under the sink. Within a month of the homeowner moving into the house, the pipe bursts causing substantial water damage.
  • An attorney prepares a will for a client who wants to exclude his children. The lawyer fails to name the children in the will, which is required by law.

Some Common Exclusions on a Professional Liability Insurance Policy

  • Not reporting the claim in a timely manner
  • Claims made prior to the retroactive date
  • Knowledge of the claim prior to the effective date
  • Claim against a firm not named on the policy
  • Claims arising out of non-professional services

Make Sure You’re Covered!

Finding and buying insurance that meets the unique needs of your business can be easy when working with the experienced team at Accuchex. We understand that your business is one of a kind and needs specific protection. We serve clients in San Francisco, Marin and nationwide. Please contact us at (415) 883-7733 x201 for a complementary consultation.