Could you business be sued for failing to render the service or product you offer?
Professional Liability Insurance, otherwise known as Errors and Omissions Insurance, protects a company from lawsuits that claim a financial loss occurred due to the negligent rendering of a professional service.
In some industries, this coverage is either legally or contractually required in order for a company to operate. Businesses in the fields of medical, legal, accounting, engineering, real estate, financial practice, or other similar industries that necessitate a certificate or license to conduct business are often required to have this coverage. In many cases, companies involved in construction or design are required by general contractors to purchase this coverage. Non-profits, NGO’s, boards, or representatives of associations may also purchase this coverage to protect against the member’s personal liability, which may be exposed for lack of ‘due care’ without a properly constructed policy. Technology companies, particularly those involved with the servicing of aforementioned industries, will typically also purchase this insurance, as even a minor glitch in programming, software or hardware installation, or breach of IT security measures can lead to lawsuits amounting to millions of dollars in damages. Simply put, if your business provides professional advice, or a service that could potentially fail and cause financial harm to an individual or person, professional liability insurance should be an integral component of your business insurance.
Professional Liability is specifically excluded from a General Liability or Business Owners Policy.
While a General Liability policy covers bodily injury, property damage, and in some cases, personal and advertising injury, and product or operations liability; professional liability provides coverage for negligence, inaccurate advice and misrepresentation leading to a direct financial loss to the consumer. Both a General Liability Policy and Professional Liability Policy should be secured for businesses involved in professional services, but it is important to understand the difference in coverage provided by both types of liability policies, so as not to assume that a General Liability Policy will provide all necessary insurance coverage. So what types of professional liability coverage are available?
Errors and Omissions Liability (E & O) – E & O covers any mistakes made by employees who work for your business, if your business charges fees for your services. It can include coverage for any errors such as failure to perform or violations of contract. Depending on your industry, your insurance needs will vary.
Directors and Officers Liability (D & O) – Having financial protection for your business’ Directors and Officers can prevent monetary loss in the event that they are held liable from actions related to their corporate positions. This can include anything from conflicts of interest to mismanagement of company assets and violation of laws.
Fiduciary Liability – Fiduciary covers claims that involve the violation of the Employee Retirement Income Security Act, or ERISA. If a manager, for example, were to violate the financial obligations of ERISA, having the right coverage can protect your company if held liable in negative situations ranging from imprudent investments to failure to enroll employees.
Employment Practices Liability – With proper insurance, your business can be protected if a worker claims that his or her rights have been violated. This can include violations from sexual harassment and discrimination to violations of the Americans with Disabilities Act (ADA), mismanagement of employee benefit plans, and accusations of wrongful termination.
Professional Liability Policies are particularly sensitive to lapses in coverage or cancellations.
Because of the potentially unlimited size of such claims, most policies are provided on a ‘claims made’ basis, meaning coverage is only provided for claims made during the policy period. A general liability policy may be cancelled or non-renewed, but will often still cover claims reported after the policy period ends, assuming the incident occurred while the policy was active. If a professional liability policy lapses or is cancelled, most policies will void coverage for all prior incidents. This is why, even for a business that has discontinued their operations, it is important to maintain coverage up to the ‘statute of limitations’ or ‘statute of repose’. Each state has different time limits, a law firm that drafts client contracts may conduct business in a state that holds the firm and officers legally liable for up to 3-7 years after the contract has been drafted, regardless of whether the firm stays in business, merges, or dissolves. For those businesses that have a professional liability policy but discontinue operations, insurance companies will usually offer what is called an ‘extended reporting period’ to provide retroactive coverage after a business dissolves. Businesses that are acquired or merge with another firm will want to secure a policy that provides comprehensive coverage for ‘prior acts’ dating back to the beginning of the original policy, often referred to as the ‘retroactive date’.
Best-in-Class Insurance at Unbeatable Pricing!
Boynton Insurance Group has partnered with best-in-class insurance providers to provide the best coverage at the best prices. Check it out for yourself now!
Boynton Insurance Group is staffed with professional liability experts who can help your business construct a customized policy to suit your organization’s needs. We have access to the highest quality and most competitively priced insurance carriers in your region. Our agency will analyze your business, suggest insurance solutions, implement the most suitable insurance coverage, and track your insurance policies to ensure that your business is protected from professional liability lawsuits.