Professional liability insurance protects professionals such as lawyers and physicians against negligence and other claims initiated by their clients. It is required by professionals who have expertise in a specific area because general liability insurance policies do not offer protection against claims arising out of business or professional practices such as negligence, malpractice or misinterpretation. This insurance policy is designed for a specific risk, the risk of loss caused by the negligent performance of professional services by design professionals.
People often run extremely important and complex projects for clients. Professional liability insurance is especially important for businesses like information technology consultants, business consultants and marketing consultants for whom incorrect advice or a failure to perform professional services could lead to a lawsuit.
The coverage focuses on alleged failure to perform on the part of, financial loss caused by, and error or omission in the service or product sold by the policyholder. However, there are some causes for legal action that would not be covered by a more general liability insurance policy which addresses more direct forms of harm. Professional liability insurance sometimes also provides for the defense costs. Coverage does not includecriminal prosecution. Professional liability insurance is required by law in some areas for certain kinds of professional practice like medicine and is also sometimes required under contract by other businesses that are the beneficiaries of the advice or service.
The insurance expected to pay for the defense of the professional in dealing with the allegations of any third party. This type of insurance is also called malpractice liability or errors and omissionsinsurance.Depending on the profession, professional liability insurance may have different names, such as medical malpractice insurance for the medical profession, and errors and omissions insurance for agents. Professional liability insurance is a specialty coverage that is not provided under homeowners’ endorsements, in-home business policies or business-owners’ policies. It only covers claims made during the policy period.
There is a retroactive exclusion date in the policyif this is the case then any claims that may be made against you for any work done prior to the retroactive date will be excluded. Policies for professional liability insurance are written on a claims-made basis, which means that a lawsuit made today could be for services completed years ago. It is important that thesepolicies provide coverage for services provided in the past to avoid future problems.
Some professional regulatory bodies are more prescriptive in matters of professional liability insurance. The limit purchased should take into account what the member considers could be a worst -case scenario for financial loss of a client or other party in the event of a professional failure.
If an individual’s business offers a professional service, the professional could at some point need professional indemnity insurance. Even though there is no basis to a claim, the cost of defense against these claims can be exorbitant. Professional indemnity cover can protect the professional service provider against this risk thus ensuring survival and continuity of the business.