Professional Liability Insurance

Understand Professional liability insurance:

Professional Liability Insurance is also sometimes referred to as indemnity insurance. Whether you are part of a large company, or one person working out of a home office, this insurance policy is an important consideration. Of course, it all comes does to your particular trade and your specific liabilities, but it is certainly worth considering for most professionals.

It should be carried by most independent contractors and business owners. A few examples of professions that can benefit from this coverage include but are not limited to architects, surveyors, dentists, home inspectors, computer technicians, lawyers, consultants, and the list goes on and on. If you are giving professional advice or performing a service for a fee, you need to carefully consider this type of coverage.

Professional liability insurance can protect you from potentially catastrophic litigation. You can be charged with professional negligence or failing to perform your professional duties, whether offering a service to a client or simply offering advice.

If you fail to deliver on what your client or customer expects, even if they misunderstood your services, they can file a claim against you. Similarly, if unexpected errors are made by you or someone that works for you, your client may claim that they are not able to conduct their business properly, because of your mistake. When this happens and you lose the claim, you can be held liable for their losses. That care result in large financial judgments against you or your business.

For example, let’s say you are a computer consultant and your company does some work on a client’s database or computers. Something goes wrong with the job and data is lost – irreplaceable data that the clients need to perform their day to day activities. This client could sue you not only for damages. Worse yet, let’s say their computer is taken from your office and the client’s data is compromised. If the data contained on their computer was sensitive there could even be fines imposed against the client or you.

This is just one small example of where a good professional liability insurance policy could save you from large financial losses. Remember, general liability insurance does not cover you for issues like this. GLI is mainly for bodily injury and property damage.

Even when a claim is baseless it can bankrupt your company. The expense of legal defence and the time it takes to be resolved has been proven to be too much of a financial strain on many small businesses. If you think things like this cannot happen to you in your particular enterprise, remember that there is always a first time.

Also, consider that a large percentage of lawsuits are without merit. Some people sue one business after another, thinking that all businesses have deep pockets and can pay. They go from one lawsuit to another settling for small settlements each time then moving onto another professional or business. Even baseless lawsuits from serial “litigation junkies” must be defended and any case can be both times consuming and expensive. As long as your professional liability policy is in force, the insurance companies’ attorneys will represent you and the cost will be covered no matter what the outcome.

Another thing to consider before you decide to go without this type of policy is that the chances of getting sued often have nothing to do with the quality of your work. Many times it depends on your client’s temperament and expectations. If your working relationship with a particular client goes sour for any reason, it’s possible to be accused of negligence even if no errors were made. For this reason alone, it is critical to carry professional liability insurance.

How To Buy Professional Liability Insurance:

When purchasing professional liability insurance, you can go through an insurance agent, a broker or get quotes online from multiple insurers. When shopping for coverage, there are many more things to consider than simply the cost of the premiums.  Here are some other things to ask about…

  • Are all legal defence costs covered?
  • If you have W2 employees or 1099 subcontractors ask if the policy will protect your company from claims.
  • Ask if it covers intellectual property infringement.
  • Ask what the limits of the policy are.
  • Check the policy for any exclusions.
  • Be sure to inquire about worldwide coverage if you do business internationally.

There are many potential allegations to be concerned about when you run a small business, even if you are a solo professional working for yourself. Failure to provide a service as expected, misrepresentation of your services, damages due to negligence or errors, and even non-disclosure can be grounds for a claim against you.

Professional liability insurance can protect you from all of these situations and give you peace of mind, so you can run your business properly. Before you decide to go without this type of coverage, do yourself a favour and get a few quotes. The low cost of this insurance may surprise you. It certainly will be a lot cheaper than having to defend yourself in court and losing a potentially large lawsuit.

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