Professional liability insurance, also referred to as errors and omissions (E&O) insurance, protects covered businesses against the financial burden of client lawsuits in the event that they are sued for negligence or unsatisfactory work.
Many nonprofit organizations such as social advocacy groups, corporate giving programs, charitable organizations and even animal shelters rely on professional liability insurance to cover court costs, attorney fees, judgments and settlements during litigation.
Located in Fairfax, VA, the Business Benefits Group (BBG) is a leading brokerage consulting firm providing insurance, technology and wellness solutions. A BBG consultant will help you navigate the complexities of business insurance and select a policy that meets the unique needs and budget of the organization.
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What Does Professional Liability Insurance Cover?
Even experts in their field can make mistakes. If a customer or client believes that there was a mistake made by a nonprofit while delivering professional services, he or she has the right to sue for damages. Professional liability insurance may protect nonprofits from financial losses even if the business is not found liable in court.
Professional liability insurance helps cover claims of:
Allegations of Negligence
If a nonprofit organization offers guidance, counseling or professional advice as part of its services, there is a risk of negligence allegations from clients. Professional liability insurance can protect nonprofits from the costs and damages by covering the expense of hiring an attorney and paying possible court costs, judgments or settlements.
Work Oversights or Mistakes
Small mistakes can result in expensive lawsuits, especially for small businesses. For example, if an animal shelter fails to notify a family that a dog has had aggressive tendencies in the past and the dog bites someone, the shelter could be sued. Professional liability insurance can help cover the financial damages that accumulate in these types of situations.
Bodily Injury or Property Damage
Professional liability insurance does not cover claims of bodily injury or personal damage. Instead, a nonprofit will want to acquire a general liability insurance policy that will cover lost wages and medical bills if a person is injured on the business premises or if the nonprofit causes damage to a third party’s property.
Failure to Deliver Services
Customers often rely on nonprofit organizations to deliver promised services. When nonprofits fail on this promise, a customer could file a lawsuit against the business.
Professional liability insurance can help cover damages if an organization is accused of not delivering promised services. There are also claims that nonprofit liability insurance does NOT cover, including:
Nearly every business is at risk for cyber crimes, including data loss or theft. Nonprofits that use, collect or store any sensitive or confidential client information should consider carrying cyber insurance.
Work-Related Illnesses or Injuries
If an employee becomes seriously ill or injured on the job, the organization may be found liable. Having a workers’ compensation insurance policy can help pay for lost wages and medical bills until an employee is able to recover and return to work.
How Does Professional Liability Insurance Work?
Insurance companies generally write a professional liability insurance policy on a claims-made basis. These policies include a retroactive date, meaning the policyholder is covered for incidents that occur on or after a specified date listed on the policy.
They also include an extended reporting period that covers claims filed within a certain time period after the policy expires. Extended reporting periods are typically 30-to-60-day periods but can be extended further for an additional fee.
The insurance company only covers claims that are made against an organization during the policy period or within the extended reporting period. In addition, the claim must be from a covered error or omission that occurred after the policy’s retroactive date.
How Much Does Professional Liability Insurance Cost?
Professional liability insurance costs can range based on a variety of factors. When pricing a policy, the insurance company will consider the details of the policy, the coverage limits, type of business and level of risk. Other influential factors include location, number of years in business, claims history, the business size and number of employees and customers.
When preparing to get a quote, nonprofits will want to make sure that they have the proper business documents available. The insurance company may ask for documents regarding quality control processes, documentation procedures, copies of contracts, employee training initiatives and any information available regarding previous professional liability insurance coverage.
Who Needs Professional Liability Insurance?
Many types of nonprofit organizations can benefit from carrying a professional liability insurance policy. Any business that gives advice or provides a professional service should have professional liability insurance to protect against potential lawsuits that stem from negligence or mistakes.
Some states require certain professionals, such as attorneys, to acquire professional liability insurance before they can perform services. Certain clients may also require a business to obtain a policy before entering into a business contract. Examples of business professionals who should consider getting a professional liability insurance policy include:
- Educational Institutions
- Religious Organizations
- Scientific Research Organizations
- Volunteering Organizations
- and more
What Other Policies Do Nonprofits Need?
Although nonprofit organizations can greatly benefit from carrying a professional liability insurance policy, this is not the only type of insurance that nonprofits should have. Professional liability policies do not protect against all circumstances.
Other policies, such as general liability, workers’ compensation and business owners’ policy, should be considered. Nonprofits should also consider cyber security insurance, auto insurance, directors and officers insurance and possibly short-term liability for purchase coverage for specific periods of time.
Schedule a Consultation with the Business Benefits Group
Experts in many fields depend on professional liability insurance because they understand their services have the potential to lead to mistakes which can cause an indirect or financial loss for their clients. With a professional liability policy, the business can provide protection from financial fallout resulting from mistakes. For more information about nonprofit professional liability insurance, call us at (844) 201-3612 or request a consultation online with Business Benefits Group today.