Professional Liability Insurance: What is it, What’s Covered, and What’s Not?
June 11, 2020
We’ve said it before and we’ll say it again: insurance is confusing. What’s a liability? What’s the difference between Professional Liability and Commercial General Liability? Why isn’t one type of insurance enough?
We can clear that up for you! Over the next few weeks, we’ll be doing a deep dive on Professional Liability Insurance. We’ll help you understand what makes it different, whether or not you really need it, and why. Read on to learn more about what it is, what’s covered, and what’s not!
What is it?
Professional Liability Insurance protects you (or your business) from allegations of errors, omissions, or negligence committed within the scope of your profession. It’ll cover your damages—legal expenses, administrative costs, and court settlements—EVEN if the claims made against you are groundless. Because Professional Liability Insurance covers errors and omissions, it’s also commonly known as E&O.
What’s typically covered?
- Failure to Render Services: The delivery of services that either falls below the standard of care for your profession or that didn’t meet your client’s expectations. The most common offenders? Missing or constantly shifting deadlines, overlooking important details, and using poor quality materials for a project. For healthcare practitioners, this also includes misdiagnosis.
- Breach of Contract: Any perceived violation(s) of contract or failure to comply with applicable laws and regulations. That includes inability to complete a project on schedule, meet project deliverables, provide particular support services, breach of confidentiality, loss of documents, and more.
- Poor Advice: Any advice that may have caused significant harm or financial loss to a client. If you provide advice to clients, you’re particularly susceptible here (financial planners, real estate brokers, advertising professionals, and the like).
- Misrepresentation: Unintentional misrepresentation of the product or service you’re offering can arise from poor communication, or lack thereof, with clients that have little understanding of confusing terms and industry language. Accounting, IT, law, or even insurance are common offenders here.
- Intentionally Wrongful, Fraudulent, or Illegal Acts: Intentionally dishonest or criminal behaviours like deliberately turning in poor or incomplete work, stealing money from a client, or breaking the law won’t be covered by insurance.
- Claims of Bodily Injury or Property Damage: Clients and third-party vendors injured as a result of products, services, and/or property are covered by Commercial General Liability Insurance.
- Employment Matters: Workplace issues such as employee discrimination, harassment, injury, and wrongful termination are addressed by Employment Practices Liability Insurance.
BUT depending on your risks, you might also consider:
- Complementing your Professional Liability Insurance with separate policies for all of your business needs so that you’re covered comprehensively; OR
- Consulting with your broker for extra coverage on certain risks (like an extra $1 million for data breach or property damage).
The bottom line? Even if you’re an expert at what you do, everyone makes mistakes. And even if you don’t, clients are unpredictable. Sometimes it only takes a single documentation error, a misstated fact, or a difference of opinion with a disgruntled client to trigger a claim. Any business that provides advice or service to clients for a fee is at risk of legal action and should at least consider investing in Professional Liability Insurance.
That’s where we come in. With over 35 years of experience and access to over 30 insurers, PROLINK—Canada’s Insurance connection can help you find the best-fit coverage for your unique needs and your budget.
Plus, if you’re part of a professional association, you could be saving hundreds of dollars off of standard market rates through one of PROLINK’s group insurance programs! To learn more, contact PROLINK today!
PROLINK’s blog posts are general in nature. They do not take into account your personal objectives or financial situation and are not a substitute for professional advice. The specific terms of your policy will always apply. We bear no responsibility for the accuracy, legality, or timeliness of any external content.