Professional Liability Insurance

Professional liability insurance protects businesses against charges of negligence or harm, based on a professional service or advice you provided. It’s also known as errors and omissions (E&O) insurance.

Professional liability insurance covers defense costs, judgment, settlements and fines or penalties resulting from the allegations of misrepresentation, breach of professional services, wrongful business practices, misleading advice and conflict of interest. 

Professional liability insurance can also cover claims of libel or slander, as well as claims for economic losses, such as lost profits or business interruption. 

It’s worth noting that professional liability insurance typically does not cover intentional acts, such as fraud or intentional misconduct. It also may not cover claims related to employment practices, such as wrongful termination or discrimination. 

The math makes simple business sense: It costs much less to prevent professional liability insurance claims than it does to defend them. Commit to these best practices to reduce your professional liability exposure: 

Keep Your Professional Liability Insurance Policy Up to Date

Your business is always evolving. Use your annual policy review to discuss professional liability insurance with your broker. Consider questions such as: Have your professional services offerings expanded? Have you changed the way you deliver them? How do the changes impact your professional liability risks and should your coverage be adjusted?

Don’t Embellish Your Profile 

Whether your organization is publicly traded, private or a nonprofit, it’s important to define your professional services duties as explicitly as possible. This practice should extend to any third-party service providers tasked with making key decisions and offering counsel to your customers

Limit All Conflicts of Interest

Investigate all potential conflicts of interest thoroughly. Be prepared to bow out if they can’t be resolved. For any gray areas, make a disclosure in writing to all interested parties and provide explicit guidance to employees to act only in the best interests of your customers.

Write Comprehensive Contracts

A well-written business contract that describes what is and is not included in the professional services you offer can prevent unfounded claims in the future. Spell out the rights and responsibilities of all parties to the contract

Without professional liability insurance, businesses may be forced to pay out of pocket for legal defense costs, damages, and other expenses related to a claim. This can be financially devastating, especially for small businesses. Professional liability insurance can also help protect businesses from financial losses, reputational damage, and loss of business due to claims of professional negligence or errors and omissions.

Who Needs Professional Liability Insurance Coverage?

Professional liability insurance is important for businesses that provide professional services such as:  

• Accounting firms
• Law firms
• Medical practices
• Financial advisors
• Real estate agents
• Architects and engineers
• Consultants
• Contractors

Any business that provides professional services and has a risk of lawsuits, and professional liability insurance is recommended. Additionally, some clients or customers may require businesses to have professional liability insurance as a condition of doing business with them.