Professional liability insurance, also called errors and omissions insurance (E & O insurance), protects your business if you are sued for negligently performing your services, even if you haven’t made a mistake.
Who needs Professional Liability Insurance?
Professionals are expected to have extensive technical knowledge or training in their particular area of expertise. They are also expected to perform the services for which they were hired, according to the standards of conduct in their profession. If they fail to use the degree of skill expected of them, they can be held responsible in a court of law for any harm they cause to another person or business.
You should seriously consider professional liability insurance coverage if your business:
- Provides a professional service.
- Regularly gives advice to clients.
- Is requested by a client to have professional liability insurance to complete a contract.
Details of what the professional liability insurance covers
Professional liability insurance coverage gives your business protection from the risks you face in delivering your professional services.
Below are items typically covered by Professional Liability Insurance:
Alleged or actual negligence
Professional liability insurance coverage protects your business against errors and omissions, actual or alleged, which occur while providing your professional services. This includes giving incorrect advice, an omission, or failing to deliver your service.
When a covered claim is reported, the Insurance Carrier will immediately defend you. They’ll also appoint an attorney if necessary, even if the claim is groundless.
Personal injury (e.g., libel or slander)
Professional liability insurance coverage will protect you against both libel and slander if committed as part of your professional services.
The policy will provide coverage for damages and claims expenses alleging the infringement of a third party’s copyright or trademark.
Worldwide professional liability insurance coverage
The policy covers claims arising from work done around the world as long as the claim is filed in the United States, a U.S. territory or Canada.
Temporary staff and independent contractors
Your professional liability insurance coverage protects you from claims arising from services done by your employees, temporary staff and independent contractors.
Additional Items to Consider
“Tail Coverage” – Extended Reporting Period Endorsement
The Extended Reporting Period Endorsement allows you to report a claim to your prior insurance company after the policy has ended. It provides insurance for covered claims that arise out of incidents that occurred during the policy period, up to the date the policy ended.
You must pay an additional premium for Extended Reporting Period coverage-possibly as much as two or more times your current year’s premium. Some insurance companies offer this endorsement at no charge – if certain special policy conditions are met by the policyholder.
Prior Acts Coverage
Prior Acts Coverage. Many insurance companies offer this option to safeguard insureds who had claims-made coverage immediately prior to the current policy period, but with a different insurance company – and who did not purchase an Extended Reporting Period Endorsement from that company when the policy ended.
Prior Acts Coverage provides insurance against claims arising out of incidents that happened before the inception or effective date of a new policy. Some companies may charge an additional premium for this coverage