Professional Liability

If you are looking for a professional liability insurance definition, you will find that it is slightly different depending upon your profession. For example, a private practice physician's professional liability coverage will be geared toward the risks of the medical profession, whereas a realtor's concerns are related to buying and selling homes. However, it is essentially defined as legal protection from "errors and omissions" that may occur as a result of performing professional services. This means it will cover you for mistakes you make as well as your negligence - things you fail to do - that result in a client's loss.

In practice, it means that if a client claims that your services, advice, or expertise have caused a personal or professional loss, you have insurance that will cover your legal defense and the costs associated with resolving a lawsuit. Litigation can be a drawn-out-process that can cost hundreds of thousands of dollars.

Professional liability insurance is a reliable way to protect your business assets. If you're sued, professional liability insurance coverage helps pay for defense costs as well as any settlements or judgments that you must pay.

Who Needs Professional Liability Insurance?

This form of business insurance appears under a variety of names because of the many different types of professions that need this type of coverage. Anyone from a home re-modeler to a heart surgeon should consider purchasing professional liability insurance coverage.

A few specific types of this insurance are:

  • Malpractice insurance: This is specifically designed to assist medical professionals accused of negligent behavior or mistakes. Everyone working in the healthcare and medical fields should evaluate whether this is a necessary coverage or not. Even if you are a health professional who is employed within a clinic or hospital that has its own malpractice insurance, it is a good idea to evaluate personal malpractice coverage for your own protection.
  • Errors and omissions liability insurance: Professionals who buy errors and omissions insurance include consultants, lawyers, brokers, financial advisers, real estate agents, architects, designers and even insurance agents. These professions are based on knowledge and advice; those who act on the advice are at risk in one way or another and may deem that the services you provided resulted in injury, damage or loss.
  • Directors' and officers' liability insurance: This type of coverage specifically deals with any negligent behavior or errors committed by top ranking company employees.

Others that may want to consider professional liability coverage include engineers, dentists, not for profit organizations, contractors and transportation businesses.

Examples of Professional Liability Insurance Claims

Professional liability claims range from simple errors to major snafus. For example:

  • A commercial client hires a design firm to design an office building to specification, including space for specialty equipment and existing office furniture. When the project is complete, the client company discovers that the existing furniture and equipment will not fit into the space, and they must pay an additional $30,000 to retrofit the space. The result is a claim against the design firm.
  • A firm hires a marketing company to produce an ad campaign, and is sued by another corporation for copyright infringement. The client firm, in turn, sues the marketing company for the cost involved in the legal process as well as for damages to their reputation.
  • A real estate agent fails to disclose a known problem or defect in a property, such as a problem with mold or radon. The home buyer learns of the problem after the sale is complete, and sues the agent for not disclosing the problem and for the additional costs involved in remediation.
  • A surgeon removes the wrong kidney; or, the surgeon recommends a surgery which the patient later learns is not beneficial and can even be life threatening.