Professionals whose businesses are service-based or advice-based may face unique risks not faced by other businesses. While these businesses may very well need your general commercial general liability insurance, this alone won’t be enough to cover the unique set of risks that they may face.
Insurance is an enigma for some, and professional liability insurance comes with its own unique set of intricacies. Specific terms and conditions, policy exclusions, and coverage limits will vary between insurer and the nature of the profession, so we always advise for any business or individual to seek out the guidance of a professional based on their own unique requirements.
Let’s get into what exactly professional liability insurance (PLI) covers.
An Overview of Professional Liability Insurance
Professional liability insurance goes by many a name, and PLI is just the more “official” moniker. Often, professional liability insurance will also be referred to as errors and omissions (E&O) insurance. This title comes from the fact that the nature of the claims this policy covers will generally be considered “errors or omissions,” although a more accurate title might be “errors, negligence, and omissions” (even if that doesn’t sound quite as good.)
Professional liability insurance is designed to cover the specific nature of professional services, and more specifically the financial losses arising from any claims made against the business or individual. Claims that are covered by PLI are typically under the scope of errors, omissions, and negligence. PLI will generally cover settlements, reparation costs, legal defense costs, and so forth.
Professional Indemnity Insurance and Medical Malpractice Insurance
Are professional indemnity insurance and medical malpractice the same thing as professional liability insurance? Technically, professional indemnity insurance and medical malpractice fall under the same scope of professional liability insurance, but they have some key differences to specifically address the unique risks of typically lawyers/legal professionals and health practitioners (respectively.)
Professional indemnity, or PI, is broader coverage to protect a wide range of professions, including lawyers, engineers, architects, consultants, etc. It can cover claims of errors and omissions, and also breach of duty, misrepresentation, and more.
Medical malpractice is a bit more specific and intended for healthcare professionals, like surgeons, nurses, and doctors. It focuses on claims that are related to medical errors, wrongful actions, and negligence resulting in patient harm/injury.
Example Scenarios for PLI
Errors and omissions insurance may vary in precisely what it covers based on the individual policy, but to give a proper answer to the question, “what is covered under professional liability insurance?” we’ll address some common scenarios that can showcase what PLI may include:
- Medical Error: If a physician were to misdiagnose a patient, resulting in comprehensive health complications, they might sue – or at the very least, hold the physician liable for their complications. PLI might cover the cost of their medical bills, and legal costs.
- Design Flaws: If an architect were to overlook a critical structural flaw in a building design, resulting in costly repairs and safety issues, their PLI might offer financial protection against potential claims arising from the error.
- Legal Malpractice: Should a lawyer fail to meet an essential deadline, causing harm to their client’s case, PLI may cover the resulting legal expenses and damages.
- Consulting Error: If a management consultant were to offer flawed advice that resulted in financial setbacks for a client’s business, E&O insurance could come in clutch to cover the resulting damages from the consultant’s negligence/errors.
These are just a few examples, but ultimately the specific coverage will vary depending on the policy and the insurer. Consult with a Vago professional for more information.
What Professional Liability Insurance Won’t Cover
Professional liability insurance will never, under any circumstances, insure against any claims that would otherwise fall under the scope of another liability insurance policy. For example, professional liability insurance won’t cover claims made against you for bodily injury or property damage. These claims would be covered (if applicable) by a general liability insurance policy.
Some other notable exclusions for professional liability insurance includes:
- Employing and terminating (policies won’t cover anything arising out of a claim made by someone due to a refusal to employ that individual, nor will it cover termination of employment. There are separate policies to cover wrongful termination of employment.)
- Discrimination – both alleged and actual. Employer’s liability may cover claims of discrimination made against you or your business.
- Harassment or physical abuse. Claims of harassment, physical abuse, or even sexual abuse are generally not covered by professional liability policies and are a notable gap. Sometimes, there may be coverage for defense costs if the claim is unfounded and no guilt is admitted.
Exclusions, for the most part, are specific to the individual policy. We highly advise working with a broker to discuss exclusions, or at the very least familiarize yourself with the specific exclusions contained in your own policy documents.
Vago’s Professional Liability (E&O) Insurance
Professionals face more unique risks in their work than other occupations. Specialist professional liability insurance, or errors and omissions insurance, is designed to safeguard both you and your business if a claim of negligence or errors/omissions should ever arise. Our packages take care of securing your financial protection and peace of mind, so you can set your sights on delivering the highest quality of service to the clients that you serve.
We insure a wide range of professional services, with our risk appetite primarily incorporating property managers, recruitment agencies, professional services, and health/medical practitioners. Give us a call for aid in insuring other lines of work.
