Professional Liability Insurance Explained 

professional liability

Are you a consultant trying to figure out if you need professional liability insurance?  

If so, you’re not alone. It’s not always easy to determine what insurance type will cover what risks. Professional liability insurance covers liability for damages arising from the rendering of or failure to render professional services. Professional liability insurance allows you to protect yourself and your business from claims not covered by commercial general liability coverage. 

What is professional liability insurance?

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

Do you need professional liability insurance? 

The need for professional liability coverage developed due to typical general liability insurance policies only responding to bodily injury, property damage, personal injury or advertising injury claims. Because professionals such as architects, lawyers, physicians, real estate brokers, technology consultants, and others can cause damage that doesn’t involve bodily injury, property damage, personal injury or advertising injury, additional coverage is needed to fill this gap. 

Common professional liability claims 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 would not cause bodily injury, property damage or advertising injuries. Because of this, the general liability policy would not be triggered. But 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, professional liability coverage would be triggered. 

Why is professional liability insurance right for your business? 

Consider these questions to help determine exactly what you need: 

  • Is the insuring agreement broad enough to capture all of your 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. Coterie can help you determine if all professional tasks would be covered under the operative definition or if additional clauses would need to be added. 
  • What if there is a sale, merger or change in position at your organization? Discuss what a possible change in services means for your coverage. Is carrier approval needed to continue coverage? 
  • Are there any exclusions? Look carefully at the list of exclusions and request copies of coverage forms as needed.  Review the list and/or forms to make sure the policy won’t preclude coverage for any professional services or tasks you need covered. 
  • Is there an extended reporting period option under the policy?  An extended reporting period (ERP) allows you to report claims – those that occur during the policy period – after your policy expires. 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 coverages include disciplinary proceedings or reduced retentions, and these may be of importance to your business. 
  • Have there been any past tasks or activities at your business that could potentially result in a claim? Have there been past instances where a claim was filed? What was the result? Discussing the specifics of these with a licensed insurance professional can help determine what coverage specifications you need now, to prepare you for the future. 

Other ways to protect your business, include: 

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

Coterie Insurance offers professional liability insurance for consultants, gig workers, home-based businesses, start-ups, and more. Contact an agent and get started today! 

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