A typical small business general liability insurance policy won’t cover property damage, bodily injury, advertising injury or personal injury claims. But small business professionals can be protected against these risks of doing business by purchasing a professional liability insurance policy. Coverage is typically applied as long as the professional engages in rendering services, taking into account any statute of limitations.
Professional liability insurance, sometimes referred to as professional indemnity insurance, helps to protect professional advice and service-providing companies and individuals from having to bear the complete cost of defending themselves or their company from a client-originated negligence claim, as well as damages awarded in a civil lawsuit against them. In some cases, professional liability insurance provides protection even when the legal claim ends up being groundless. It doesn’t typically cover criminal prosecution costs or some potential liabilities that fall under civil law that aren’t enumerated in the policy.
In some professional practices, like in the legal and medical fields, professional liability insurance is required by law. Depending on the industry and profession, this type of insurance may take on different names and types. For instance, you may have heard it called malpractice insurance in medical professions. Lawyers, brokers, and consultants use E&O Insurance. Errors and omissions insurance provides protection against “mistakes” which occur while providing a service, and is also considered professional liability insurance.
But doctors and lawyers aren’t the only ones that purchase this type of liability insurance; there are many other professions that commonly purchase this type of insurance. Accountants (CPA’s), financial service providers (CFA’s), construction workers, plumbers, and general contractors also need to be covered against personal injury, bodily injury, property damage and advertising injury claims. Software developers, website designers, architects, and engineering consultant are all subject to making a mistake while carrying out their services — and thus, are good candidates for professional indemnity insurance. Even some nonprofit and charity organizations need to be professionally insured.
What’s the takeaway? With the increasing costs and potential significant consequences resulting from a professional liability lawsuit, professional liability insurance is now more important than ever for small businesses and professionals who render services.