Professional Liability Insurance 101

Professional liability insurance covers liability for damages arising from the rendering of or failure to render professional services. Protect yourself and your business from claims not covered by commercial general liability coverage.

What Is Professional Liability Insurance?

Professional liability insurance, also called professional indemnity insurance, protects professional personnel from negligence claims made by their patients or clients. Professionals who commonly turn to this type of liability insurance for coverage include architects, construction firms, home inspectors, lawyers, physicians, real estate brokers and accountants—among others. Specific professional liability insurance carries different names depending on the profession. For example, professional liability insurance in the medical profession may be called medical malpractice insurance, while real estate brokers fall under errors and omissions insurance coverage.

What Are Common Professional Liability Insurance Claims?

The need for professional liability coverage developed due to typical general liability insurance policies only responding to bodily injury, property damage, personal injury or an advertising injury claim. Because professionals such as architects, construction firms, lawyers, physicians, real estate brokers, technology consultants and others can cause claims without bodily injury, property damage, personal injury or an advertising injury claim, additional coverage is needed to fill this gap.

Common claims made on these policies include negligence, misrepresentation, violation of good faith and fair dealing, and inaccurate advice. For example, if a web design platform fails to perform properly, it will not cause bodily injury, property damage or advertising injuries. Because of this, the general liability policy would not be triggered. However, because the web design platform not performing correctly could directly cause financial losses and may be attributed to a misrepresentation of the platform’s capabilities, the professional liability coverage would be triggered.

What Does Your Business Need in Its Professional Liability Policy?

When buying professional liability coverage, consider the following to help you determine what you need:

• Is the insuring agreement broad enough to capture the policyholder's current and future work? Determine if the policy covers the scope of your organization’s professional tasks and services by reading the definition of the covered services in the policy. For example, in a medical professional’s professional liability coverage, the operative definition would be “medical services” or a comparable phrase. Your insurance broker can help you determine if all professional tasks would be covered under the operative definition or if additional clauses need to be added.
• What if there is a sale, merger or change in position at your organization? Discuss what these possible changes in services mean for your coverage. Is approval needed to continue coverage? If your company will be involved in M&A activity, learn more ways to protect your company by reading “M&A Due Diligence Must Include Insurance Due Diligence.”

• Are there any exclusions? Look at the list of exclusions that resist coverage. Review the list to make sure it does not preclude coverage for any professional services or tasks that need to be covered.
• Is an extended reporting period an option under the policy? These provisions offer extensions of time to report claims that would otherwise fall outside the policy period—as long as the act/omission resulting in the claim occurred during the policy period. Find out what extended reporting period options are available and discuss how much time the policyholder may need to report a claim.
• Can the policy be customized or modified? Can extensions be added? Common additional coverage includes disciplinary proceedings or reduced retentions and may be important to your business.
• Could any past tasks or activities at your business result in a claim? Have there been past instances where a claim was filed? What was the result? Discussing these specifics with your insurance broker can help determine what coverage specifications you need now to prepare you for the future.

Other ways to protect your business, in addition to securing professional liability insurance, include the following:

• Establish a high standard for product and service quality control at your organization.
• Keep all company records updated and accurate.
• Train employees thoroughly and properly.

Are All Professional Liability Policies the Same?

There is no standard, all-encompassing policy for professional liability protection. That’s why working with an expert who takes the time to get to know you and understand your business is essential.

Your reputation is your most valuable professional asset. Your Hylant professional liability insurance expert is here to help you safeguard it. Contact us for assistance.

Related Reading:

Commercial General Liability Insurance 101

10 Types of Construction Insurance Builders Should Know

The above information does not constitute advice. Always contact your insurance broker or trusted advisor for insurance-related questions.