No matter how big or small your company is, or how long you have been in business, there are certain risks that never go away. One way to keep your business protected is by acquiring a professional liability insurance (PLI) policy. Also known as E&O insurance, professional liability coverage is designed to protect professionals against claims of negligence lodged by clients or patients.
What Is Professional Liability Insurance?
Professional liability insurance is often used by lawyers, physicians, attorneys, architects, accountants, real estate agents, and other professionals who may suffer claims of negligence from unsatisfied clients or customers. It also protects businesses in the event that a business owner is sued due to work that does not meet a client’s expectations. Anyone who provides professional services should consider acquiring a professional liability insurance policy.
Why Do Businesses Obtain Professional Liability Insurance?
As a business owner or head of HR for your company, you may be wondering if you really need professional liability insurance. In most cases, the answer is yes. There are many scenarios in which a policy could come in handy, such as when a customer files a lawsuit due to your company delivering a project late or incomplete, when you create an app for a client that contains bugs, or when you fail to secure a customer’s network and a data breach occurs.
When these types of problems arise, you could face a major lawsuit that puts your business at risk. Lawsuits can add up to hundreds of thousands of dollars or more and if you do not have the ability to pay, you may have to close your business. With professional liability insurance, you can get help paying for court costs, attorney fees, expert witness fees, and various other judgements, fines, and settlements.
What Does Professional Liability Insurance Cover?
Even if you have not made a mistake, your company could still be found responsible for certain damages. Professional liability insurance provides a wide range of coverage options to ensure that your business remains safe from all types of lawsuits. Your policy may cover the following:
1. Alleged or Actual Negligence
You can trust your professional liability insurance policy to protect you against alleged or actual errors and omissions that could occur when providing clients with professional services. From failing to deliver a promised service to giving incorrect advice, your policy can be useful in all types of situations in which a customer claims negligence.
2. Costs Associated with Defense in Court
If you ever have to face a lawsuit in court, you may find it difficult to pay for all of the associated defense costs. Fortunately, a professional liability insurance policy can help cover these costs. Defense situations can occur for a number of reasons, such as if a real estate agent is sued for failing to disclose defects in a property.
3. Libel or Slander
Personal injury can have major legal repercussions that negatively impact your business in many ways. Libel and slander are two types of personal injury that your business may experience. Whether or not the claims are valid, you could be sued which not only impacts your reputation, but also your finances.
4. Temp Staff and Contractors
It is not just your employees that you have to worry about when it comes to lawsuits. Any temporary staff or independent contractors that you have working for you could result in a claim. As these individuals represent your brand, you are essentially responsible for their actions in the workplace.
5. Claims and Damages
A client can sue for damages in a wide range of situations that you may not have necessarily planned for. For example, a research consultant may incorrectly research the genealogy of a family, or a marketing firm may develop a campaign that does not give the client the results he or she is looking for.
What Is Not Covered by Professional Liability Insurance?
While professional liability insurance covers a range of situations, there are certain things it does not cover. While all policies are different, most do not cover the following:
1. False Advertising
False advertising is not usually covered by most professional liability insurance policies. For example, a professional may lie about where he went to college or where he worked previously to try and appeal to a larger audience. However, if customers find out that you lied, they could potentially sue you for false advertising.
2. Trade Secrets
Trade secrets are incredibly valuable in a competitive industry. However, trade secrets can become stolen, resulting in litigation. If your company is involved in a situation involving trade secrets that results in a lawsuit, you may be responsible for any damages that incur.
3. Property Damage
Most professional liability insurance policies do not cover property damage. For example, if someone breaks into your place of business and steals expensive equipment, your policy will not likely cover the cost to replace the stolen items.
4. Intentional Wrongdoing
Intentional wrongdoing means that your company knows their actions were wrong but went through with it anyways. If your company is found guilty of intentional wrongdoing, a professional liability insurance policy will not cover any damages.
5. Employee Injuries
Injuries to employees can occur at any time. Having the right type of insurance to cover these types of situations is crucial. While professional liability insurance does not cover employee injuries, your workers’ compensation insurance should.
Acquiring a Professional Liability Insurance Policy
Cases of negligence are often not easily defined and are often interpreted differently by you and your customers. If a client steps forward and claims to be unsatisfied with your professional services, your business could face a serious lawsuit. Even if you are not found guilty in court, you could be looking at court and attorney fees which can add up to a significant amount. By having the right policy under your belt, you can gain some peace of mind that your business is protected. For more information about professional liability insurance or to acquire a policy, contact the benefits consultants at BBG Broker.