If your business relies on your expertise to provide professional services to other businesses or individuals, then your clients expect you to have substantial training in your field, and your work must satisfy the standards set by your industry, individual client contracts, and the state. Otherwise, you might wind up in court if your service or counsel causes your client(s) to incur losses.

Professional Liability Insurance can help you pay for claims and lawsuits that are not covered by general liability insurance, like when your clients accuse you of:

• Negligent services
• Misrepresentation
• Undelivered services
• Violation of good faith and fair dealing
• Work mistakes or inaccurate advice

How professional liability insurance works

There are generally two types of professional liability policies:

1. Claims-made: The policy is in effect both when the event occurred and when the lawsuit was filed

2. Occurrence: This policy covers an event that occurred during the period of coverage, but you’re no longer in the profession because of retirement, change in career, or other event.

The insurance policy is expected to cover only the financial costs up to the limits of the policy, that typically include:

• Cost of legal defense against the claims
• Cost of judgments against you
• Other fees - such as licensing board penalties

Keep in mind that any losses caused by dishonest or deliberate acts, as well as non-financial losses are not covered. Moreover, the policies have a deductible between $1,000 and $25,000 depending on your profession, size of business, and level of risk.

Does your business really need professional liability insurance?

In some states, doctors and attorneys are required to have professional liability insurance, in the form of medical and legal malpractice, respectively. Other professionals who may benefit from professional liability insurance include:

• Investment advisers
• Information technology consultants
• Insurance professionals
• Management consultants
• Architects
• Accountants
• Engineers
• Graphic designers
• Software developers
• Real estate agents and brokers

Any other profession where your services or advice could cost the client money should also consider professional liability insurance.

A 2017 survey revealed than more than one-in-five businesses face challenges (such as contract disputes and client complaints) that could lead to professional liability lawsuits. Another litigation impact study showed that small business lawsuits typically cost between $3,000 and $150,000.

Considering the potential financial implications of a lawsuit, as well as the potential damage to your business reputation, it is a good to carry professional liability insurance even if the state laws or your clients don’t require you to. Please contact Capital Providers Insurance Services to discuss your candidature for professional liability coverage.