Professional liability insurance or more commonly referred to as “errors and omissions” insurance is an indispensable coverage for any professional service provider in today’s ever-increasing litigious world.
People today are more willing to take their grievances through the legal system whether they are warranted complaints or not. This is putting our professional service providers in a difficult position where they need to make sure that they have insurance coverage for any legal fees to defend themselves, or worse, to pay any settlements that may have been ruled against them.
If your business provides any professional services to the public, it will be worth your time to read more about how professional liability insurance can help protect you, your family, your business, and even your employees.
What is Considered a Professional Service?
If you are a professional who is providing expert advice, care, or guidance to the public, you are a professional.
Examples of professions that would be offering a professional service are:
- Financial Services (accountants, advisors, bookkeepers)
- Real Estate (agents, appraisers)
- Medical (clinics, chiropractors, optometrist, massage, social workers, first-aid trainers, etc.)
- IT or Technology Experts
- Insurance Brokers
- Travel Agents
- Certified Translators
Why is Professional Liability Coverage So Important?
Professionals that fail to meet one of their responsibilities or requirements of their profession could have consequences that jeopardize their business and their personal assets. If you have a client who feels that the have been cheated, information has been omitted, mistakes were made, or that you didn’t complete your work as expected, they could sue you and your business to recoup for their financial or emotional loss.
If a lawsuit is well-founded or not, it will be a financial drain for you and your business to fight the accusations. Even if you did nothing wrong, it could cost thousands of dollars and possibly years of your time to simply prove that you did nothing wrong.
In recent years it has become apparent that “Errors and Omissions” insurers have been expanding the types of businesses that they will insure with this type of coverage. Even builders are in need of this type of coverage due to mistakes in their building plans that cause significant investments to fix. The world has shown us that we are moving into a more litigious society, and our skilled professionals are becoming a large and distinct target.
What Types of Coverage Come with Professional Liability?
Every insurance company will offer different limits, coverages, and legal wordings in their policies. For this reason, it is difficult to list exactly what you should be expecting in your policy. It is critical to have an insurance professional help you choose the best coverage suited for your type of business.
There are two important coverages that you will most likely see on your professional liability coverage (Errors and Omissions):
- Financial loss to third parties whom you are liable to due to an error, omission, or a wrongful or negligent act committed during your professional service.
- Defence costs that are covered by the insurance policy.
Real Life Claim Examples
- An accountant doesn’t file a form required when filling out their client’s business taxes. It takes years before the error is found in an audit. The client sued the accountant for interest and penalties resulting solely from the negligence of the accountant totalling $78,000.
- A chiropractor performed a manipulation that caused partial paralysis, short-term memory loss, and articulation problems. It was alleged that the chiropractor did not adequately inform the patient of the potential risks of these manipulations. A lawsuit was filled in the amount of $3 million.
- An information technology company was hired to streamline business software into one single software system. Following multiple years of development and implementation, the software was installed across all the company’s stores. The software lacked the required functionality and contained many bugs which caused it to improperly track incoming and outgoing inventory and caused invoicing errors. The claim was ultimately resolved for 2 million with defence costs totalling $200,000.
In our ever increasingly litigious society, professionals are finding themselves in the cross-hairs of many lawsuits. Most professionals hold themselves to a very high standard and try their best to avoid any kind of error or omission in their work, but as mentioned above, it really doesn’t matter if you made an error, omission, or were negligent in any way. If someone feels as though someone should be held responsible for their loss or trouble endured, they may turn to litigation. This could place a financial burden on you or your business for years as you could be financially tied up in a legal battle to prove yourself innocent.
Having the professional liability coverage can help you through those types of scenarios and help keep your business operating to help the rest of your clients in need. Contact us today if you need a quote on professional liability coverage or if you need more information on the benefits of having this coverage for your business.