| Professional Liability Insurance |
| Written by Aaron Adam | |
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Professional liability insurance is basically malpractice insurance for non-doctors. This type of insurance protects professional practicioners such as lawyers, accountants, architects, etc. from potential claims for negligence made by their clients. Because of the litigious nature of modern society, an increasing number of businesses are purchasing professional liability insurance in addition to general liability insurance to protect them from claims that may be filed by clients or third parties.
In times past, professional liability policies were only issued to a small customer base of professionals whom courts imposed very high standards of care regarding responsibility for their errors, omissions and acts of negligence. Over the last 30 years, courts have been holding a wider variety of professionals responsible for errors, omissions and acts of negligence with regard to their clients and third parties. This legal trend has led to a large increase in the number of businesses buying professional liability, or E&O coverage, to supplement their general liability insurance coverage. What it coversProfessional liability insurance differs from general liability coverage in that general liability insurance only applies to claims of bodily injury, property damage, advertising injury, or personal injury claims. Professional services can give rise to claims not covered by general liability insurance. The theory behind professional liability claims is that because professionals in certain fields are required to have very specialized training or education, they should be held liable if they do not perform up to a certain standard held by the industry. How it worksHere's an example of an professional liability claim:A software firm undertakes to build a new database for a company. The firm completes the database, but omits several key bits of information, rendering the database useless and costing the client company hundreds of thousands in lost business and costs to have a new database built. The client company sues the software firm. Because the claim doesn't have bodily injury, property damage, advertising injury, or personal injury, the claim doesn't fall under the company's general liability policy. The heads of the company were wise enough to purchase professional liability, or E&O insurance however, and are able to seek coverage under that policy. Who needs itProfessionals engaged in lines of work where they are presumed to have extensive technical knowledge or training and may be held to that standard in a court of law should seriously consider purchasing professional liability insurance.The amount of professional liability insurance you will need and how much it will cost depends upon the size of your business, the level of coverage you require and your past claim history. As with all types of insurance, the biggest variable in determining the cost of your premium will be the level of risk you pose to your insurer. People who often have claims filed against them will most likely pay larger premiums than lower risk clients. For a small business, professional liability insurance can cost anywhere from $5,000 to $7,000 per year, according to industry experts. Technology based companies are a growing client pool for professional liability policies because of the potential for costly negligence claims for products and services that don't work properly. |
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