What Is Professional Liability Insurance?
Even if you’re an expert in your business, you may make a mistake And if the client or customer thinks the mistake impacted them financially, you may be sued. Professional liability insurance, also known as errors and omissions insurance, or E&O insurance, helps cover you and your company if you are found negligent in the professional services you provided.
Professional liability insurance helps protect you and your company against a claim that professional advice or services you provided caused a client or customer financial harm due to mistakes on your business’s part or because the business failed to perform some service.
For example, if you are an accountant or bookkeeper and make a clerical error that costs a client thousands of dollars or if you work as a photographer and accidentally damage a client’s wedding photos – claims in these situations could have costly legal repercussions. Professional liability insurance will help cover the costs and fees associated with resolving such incidents, including legal fees and damages awarded.
One thing to consider when choosing a Professional Liability insurance provider is that many professional liability insurance policies are written on a “claims made” basis with a retroactive time frame. For example, if a claim is made against you for an act that happened before the retroactive date on the policy, that claim won’t be covered. So when selecting your Professional Liability policy consider the retroactive date and remember, generally the farther back the date, the better.
Who Needs Professional Liability Insurance?
Many types of businesses need professional liability insurance. In some states certain kinds of professional practices are required to carry professional liability insurance. In other cases, a client may require a business to have professional liability insurance as a condition of a contract to do work.
If you work directly with customers by providing services, consider a professional liability insurance policy. A customer or client can sue even if you’ve done nothing wrong. If a customer or client believes for example, they received inferior service, mistakes were made or they received bad advice from your company, they may make a claim or even sue your business.
Professional liability insurance helps cover common claims including negligence, misrepresentation, violation of good faith and fair dealing, and inaccurate advice. Depending on the terms, a professional liability insurance policy may also help cover privacy violations.
Having professional liability insurance can help protect you and your business from the time consuming work and costly expenses that come with mounting a legal defense after a client sues.
The Hartford offers a broad selection of industries the ability to add professional liability insurance coverage to their business owner’s policy.
While there are some professions or industries that typically would not do without professional liability insurance, anyone or any business providing professional advice or services to clients could be at risk of a liability claim and may benefit from the protection offered by this coverage. Here are some examples of professions that often benefit from professional liability protection.
Professional Liability Insurance for Lawyers
The Hartford knows that no two law firms are alike. We understand that a smaller legal practice typically has different coverage needs than a much larger law firm. That’s why The Hartford provides lawyers professional liability insurance that firms can tailor to meet their specific needs.
- Law firms with less than 20 attorneys – Professional Liability Insurance coverage1 is offered through Target Professional Programs,2 a countrywide program with years of experience handling professional liability coverage.
- Law firms with 20 or more attorneys – The Hartford’s specialized team of underwriters offers attorneys professional liability insurance coverage on an excess basis to firms with more than 20 attorneys. With a reputation for superior service, all claims are adjusted by a licensed attorney with both private practice and insurance industry experience.
Professional Liability Insurance for Consultants and Other Professionals
Professional liability insurance coverage from The Hartford helps protect consultants and other professionals
against errors and omissions that may arise from the professional services they provide to clients and other third parties. These errors could range from misrepresentation to oversights and faulty recommendations.
Professional Liability Insurance for Accountants and Tax Preparers
Whether you are a certified public accountant, tax preparer, or bookkeeping firm, The Hartford offers accountants and bookkeepers professional liability insurance to help cover small to mid-size accounting and bookkeeping firms from potential liability and malpractice claims. Regardless of the size, an accounting firm is exposed to liability risk. This coverage is administered by Target Professional Programs,2 a country-wide program that with years of experience handling professional liability coverage.
Professional Liability Insurance for Home Inspectors
Even if you’re an experienced home inspector, mistakes can happen. And if they do, it can put you at risk for potential lawsuits.
The Hartford offers professional liability insurance for home inspectors, which provides protection that can be customized by the home inspector through BNK Insurance Services,3our exclusive program manager. With a wealth of knowledge and a strong track record of delivering high-quality insurance solutions, the BNK team understands real estate risks. Most importantly, BNK can provide highly personalized service to home inspectors and other real estate professionals.
Professional Liability Insurance for Technology Professionals
Information Technology (IT) is integral to the operation of most businesses today. When technology fails, the financial impact on a business can be significant, and the companies affected often sue their technology product or service providers over errors. Unfortunately, most traditional liability insurance policies are not designed to respond to pure financial claims. The Hartford can help protect against errors and omissions risks for a variety of technology professionals and a broad array of technology companies
, including those in the field of:
- Software and information technology
- Hardware and electronics manufacturing
Not every technology company needs the same level of protection. This is why The Hartford offers different product suites that provide robust coverage options.
Professional Liability Insurance for Real Estate Professionals
The Hartford offers flexible, reliable errors and omissions liability insurance coverage that can help protect a wide range of real estate firms against losses resulting from negligence, errors, and omissions in the performance of their services. Designed for small and midsize businesses, this coverage is offered through our exclusive program manager, BNK Insurance Services.3
How Much Does Professional Liability Insurance Cost?
Professional liability insurance rates are impacted by a few different factors. Because businesses in different industries can get errors and omissions insurance coverage, the policy rates usually differ from company to company. When it comes to professional liability insurance, there isn’t one policy that applies to every business.
For example, a professional liability insurance rate for a travel agency may be different and have a lower premium than the insurance policy to cover a tax preparer.
- Policy coverage limits and other terms of the policy, such as the retroactive period
- The type of business
- The location of the business
- The size of the company, number of employees, and the number of clients
- Years in business
- Claims history
- Depending on the state your business is in, your credit score may affect the insurance rate
Some factors may also reduce the rate of an errors and omissions insurance policy. Here are a few things that can result in a cheaper rate:
- Having a clean claims history
- Choosing a higher deductible for your professional liability insurance
- Having a quality control process in place to catch or limit potential errors before products or services are delivered to a client
- Depending on the state your business is in, your credit score may have an impact on your insurance rate
When getting a personal liability insurance quote, you may be asked to provide some documentation, such as:
- Copies of contracts
- Documentation procedures
- Any information about previous errors and omissions coverage
- Quality control processes
- Employee training initiatives
These documents are used by the insurance company to evaluate the risk associated with your business.
There are a number of factors to be aware of when determining how much professional liability insurance coverage to get for your business. Working with a specialist at The Hartford can help you pick the right amount of professional liability insurance coverage for you and your business at the right price.
Professional Liability Insurance Versus Malpractice Insurance
Professional liability insurance helps cover businesses in various industries if a customer sues or claims a negligent act, error, or omission in the service provided resulted in financial harm.
Malpractice insurance is a type of professional liability insurance. It provides coverage protection against claims of negligence or misconduct by physicians and other healthcare professionals, such as dentists, nurses, or physical therapists. A malpractice claim can be filed if a person is hurt or damaged because of an error made by the healthcare professional.
Whether it’s malpractice insurance or any other type of coverage, the objective of professional liability insurance is to keep a business in operation. Professional liability insurance is a policy that helps cover a mistake made by your business or a wrongful act attributable to your company.
Professional liability insurance helps businesses weather the impact of a significant mistake that may cause harm to a client or customer. These situations often result in lawsuits. A professional liability insurance policy can help cover the legal costs associated with putting together a defense plan.
Those working in a profession that provides advice to clients or provides a service to clients can be held responsible by the customer if something goes wrong. If the service they received did not meet their expectations, they can sue. And if the service causes physical problems or financial harm to the customer, your company could be liable.
Here are some examples of how having a professional liability insurance policy can help protect businesses in different industries:
- A travel agent is hired to book a family vacation. As the trip nears, the travel agent realizes they booked the wrong week. The family is unable to go on the vacation during the booked week because of scheduling conflicts. The family sues the travel agent for the money they paid for airline and hotel reservations.
- An advertising agency is hired by a toy company to promote a new toy for the holiday season. One of the designers misrepresents a feature of the toy in the materials created. The toy company sues the advertising agency for lost revenue because they weren’t able to fully market the toy during the holiday season.
- A court reporter receives a letter from an attorney demanding transcripts from a deposition they did a week ago. The court reporter realizes the transcript was accidently deleted from their hard drive. The court reporter discloses the error and is sued by the attorney for costs to have the witness deposed again.
Article was written by TheHartford.com