Professional Liability (Errors & Omissions) Insurance
Embroker helps business owners get the right professional liability insurance to properly protect your business from civil lawsuits for negligence, common mistakes, malpractice, misrepresentation claims, and more.
Index
What Is Professional Liability Insurance?
Professional liability insurance is commonly known as errors and omissions (E&O), professional indemnity, or malpractice insurance. They all refer to insurance that keeps you and your company protected from civil lawsuits for negligence, common mistakes, omissions, misrepresentation claims, and more.
Professional liability insurance is typically the first policy purchased by anyone providing professional services (lawyers, accountants, consultants, etc.) as they realize these claims can be among the most expensive.
If you already have general liability insurance, you may think that you don’t need professional liability coverage. However, many liability policies only cover bodily injury, personal injury or property damage, so the most likely of claims (i.e. those related to your services) do not fall under the GL umbrella.
For example, professional liability can cover you if a customer chooses to file a claim against you related to a service that you either failed to provide entirely or sufficiently. To clarify, if a service you performed did not have the expected or reasonable results in the eyes of your client, you could be sued.
This means that businesses and professionals operating in industries that require specific expertise will find that general liability insurance policies won’t offer protection against claims that stem from their professional practices – such as malpractice, negligence, or misrepresentation.
In the medical and healthcare industry, when talking about doctors, chiropractors, dentists, and nurses, this type of insurance is often called malpractice insurance.
A good professional liability policy will be able to cover all of the costs of your defense, as well as your judgments or settlements.
Difference Between General And Professional Liability Insurance
Business owners are often confused about whether they need both the general and professional liability policies. However, the truth is that the exposures the two policies will cover are fairly different, and there’s minimal overlap between them.
General liability insurance will provide broad coverage for claims of bodily injury and property damage resulting from your products, services, or operations.
Professional liability insurance will protect your business from claims explicitly related to the professional services or advice you offer.
For instance, if someone slips and falls on your premises, your general liability policy will respond. If a client decides to sue because the service you provided didn’t have the promised results, your professional liability policy will cover the legal expenses and settlements.
Who Is E&O Insurance Coverage For?
E&O insurance is particularly useful for any business that offers professional services, such as lawyers, accountants, consultants, investment advisors, real estate agents, architects, medical experts, engineers, tech companies, and others.
These professions require specialized education or training, and their practice must meet certain state, industry, contract, or client standards. Oftentimes, the professional is licensed for their trade. Compromised standards or not living up to the standard of care can lead to expensive legal defense costs or even litigation which will put your company assets at risk and can even endanger your personal assets.
Really, any small business or large corporation that is providing a service to a client for a fee should look into E&O coverage, whether you’re a dentist, a beautician, or a wedding planner.
Ask yourself:
- What is the material impact my services have on my clients and what if I make a mistake or upset a client?
- Are my clients ever at risk of monetary damages if I make a mistake or give bad advice?
- Is there a lot of variation in the services I provide from person to person?
- Do I ever make suggestions or claims that could be construed incorrectly?
If you’re answering “yes” to these questions, you should have a professional liability policy. Click the ‘Get Started’ button above to get your instant professional liability insurance quote in just a few minutes.
Why Do You Need Errors & Omissions Insurance?
No matter how good you are at doing your job and how long you have been doing it, you are bound to make a mistake every now and then or have a disgruntled client. E&O coverage protects you in the case that you do make a mistake that a customer decides to sue you over.
For example, if your client in Springfield, Massachusetts needed important products shipped to him for the grand opening of his store, but your company shipped them to Springfield, Illinois instead, you can expect a lawsuit from that customer.
In some instances, E&O claims aren’t even related to money. A claim can be made for less tangible issues, such as loss of reputation or emotional distress.
What Does a Professional Liability Insurance Policy Cover?
A preferred professional liability policy will cover your defense costs, as well as damages you are ordered to pay and settlements reached in and out of court.
What is most important to take into consideration when discussing what an E&O policy covers, is that these errors and omissions need to be unintentional in order for the insurance to pay claims on the policy.
Some of the unintentional acts of negligence that E&O insurance covers include:
How Professional Liability Insurance Works
As already mentioned, most E&O policies are claims-made policies, meaning that the policy must be active both when the alleged issue occurred and when the claim was filed.
It’s important to note that even if a claim arises and you properly report the matter, you may not be covered if the actual service occurred before the retroactive date. The retroactive date typically coincides with the date you first started purchasing continuous professional liability insurance and keeps providing you prior acts coverage.
This demonstrates the importance of making sure that you purchase the professional liability policy early (ideally when the company is founded) and that you are continuously renewing your policies on time so that you don’t get caught with a coverage gap or deletion of prior acts coverage.
Many insurers will also add-in an extended reporting period to their professional liability insurance. The extended reporting period will respond to claims filed within a certain time after your policy expires. This will typically be a 30-60 day period, but it’s possible to extend it by paying a higher premium.
What’s Not Covered?
An important factor to take into consideration with professional liability coverage is that you will never be covered if the act is proven to have been an intentional one. If the act is proven an intentional one, this would be considered a criminal offense, and your professional liability policy would not cover it.
Therefore, if you committed intentionally illegal, dishonest, or malicious acts, you won’t be covered.
You will also not be covered if you knew about a claim before the policy incepted. This is another reason to continuously buy E&O insurance as you must report matters once you find out about them. There is also no hiding. If you know of a matter, buy insurance and then try to report it as a new claim, the discovery process will almost always uncover the knowledge date.
Some issues that are often confused with E&O insurance are bodily injury and property damage, which are typically covered by a general liability policy, not a professional liability one.
And as already mentioned, you will not be covered outside of the duration of your policy if the E&O coverage is a claims-made policy.
Does Professional Liability Insurance Have A Deductible?
Like most coverages, professional liability insurance does have a deductible. A deductible represents a certain amount of money that a business will have to pay out of pocket before its coverage kicks in. Typically, the higher your deductible is, the lower your premium will be.
There are also a number of different deductible options to consider when securing your professional liability policy. Typically, you’ll have to pay a deductible each time you file for a claim. However, most insurers will also offer an aggregate deductible. With this option, you’ll have to pay a capped deductible once annually – and it will cover all your claims, regardless of how many you file.
Additionally, you can specify that you want a first dollar defense deductible option. It will make your deductible apply only to damages and not legal costs.
Keep in mind that these options will make your professional liability more expensive.
What Does Professional Liability Insurance Cost?
It’s impossible to exactly determine your professional liability insurance premium without going through a full quoting process. However, we can broadly discuss what business can expect to pay on average, and break down the business factors that will affect how much you’ll have to pay for this type of insurance.
The factors that play a role in determining the cost of your professional liability insurance, include:
Why Get It With Embroker?
Easy.
We’ve made it easier than ever before to complete the purchase and get coverage. How easy? We don’t even need to see equity ownership or financial statements from you.
Affordable.
As a digital company, Embroker passes the savings for unnecessary administration on to you—for the most competitive professional liability insurance price you’ll find anywhere.
Complete.
Protect your business with the broadest coverage in the industry. You can tailor your professional liability policy to your needs by choosing your own limit and deductible.
Human.
We provide you with expert support no matter your question: Reach us 24/7 via phone, email or live chat. You even get a personal account manager to look after you and your insurance needs.
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Reed Longyear Malnati & Ahrens
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