You must have heard the quote, “To err is human, but to forgive, divine!” But here is my rendition of it, “To err is human, but to forgive insurance!” Some errors can cause a significant financial blow to your business, but professional liability insurance saves the day thanks to insurance!
Simple errors like non-adherence to a contractual deadline or even a small piece of advice that caused a financial loss for your client can lead you to be sued for your lapse of judgment. But professional liability insurance can prevent such scenarios and provide you financial stability!
What Is Professional Liability (PL) Insurance?
Professional liability insurance is business insurance that covers you for any error or malpractice done by you. It protects your business against claims of financial losses incurred by your client because of your mistakes.
It is more famously known as errors and omissions (E&O) insurance or medical malpractice insurance (we’ll see in the article why!).
Why Do You Need Professional Liability Insurance?
You need professional liability insurance if you are providing any service. That’s because if, at any moment, one of your clients feels that your service is not working out for him or is negatively impacting his finances, he might sue you for negligence.
When such matters reach court, you can be held liable to pay fines or a settlement amount to your client. The costs can rack up to thousands of dollars in lawyer fees and legal processes! These legal costs can lead you to bankruptcy! But you can avoid that! Get yourself PL insurance!
What Does Professional Liability Insurance Cover?
#1. Mistakes or Negligence
Mistakes in services provided by your company that causes financial losses to your client can get you sued. Or a service you promised to the client but did not perform can lead to the same result. In such a case, you will receive all the legal fees from the insurance provider.
For example, a doctor performs an erroneous surgery and gets sued because the client’s health deteriorates.
#2. Reputational Damage
Suppose you talk negatively about your competitor on the radio; unintentionally, your competitor can sue you for reputational damage!
But PL Insurance is to your rescue as it will cover all the settlement costs, judgment, attorney fees, etc.
#3. Copyright Infringement
Say you are a fitness coach, and you posted the after-before photographs of your client without its permission. Now you can be held liable for your actions. But relax. It is covered under professional liability insurance.
#4. Breach of Contract
Let’s assume a chartered accountant does not fill the IT returns of its client within time, and the client ends up paying a hefty fine. You can be sued in such conditions. But you are safe as you have a PL Insurance policy.
What Doesn’t PL Insurance Cover?
- It does not protect you against bodily injuries. Check out general liability insurance for bodily injury claims.
- It also does not cover lawsuits by employees against workplace harassment or unlawful termination.
What Will Your PL Insurance Pay For?
Your professional liability insurance will pay for any costs incurred if a lawsuit is filed against you for a professional mistake. The areas covered are,
- Attorney fees
- Settlement amount ( money paid to the client for dropping the lawsuit against you)
- Judgment fees ( money paid to the client if the judge decides in the client’s favor)
- Court administrative fees
When Should You Get Professional Liability Insurance?
Professional liability insurance is a must-have whether you are a small business, an MNC, or an NGO! Below are examples of a few professions that need professional liability insurance to get the hang of it.
Accountants offer financial advice, bookkeeping services, etc. An honest mistake can happen any day! If the client finds a miscalculation in accounting, he might sue you for financial losses! Professional liability insurance protects you in such cases.
#2. Medical Professionals
PL insurance is also known as medical malpractice insurance because its biggest beneficiaries are doctors, dentists, and other medical experts! Medical professionals are mandated by law to carry this insurance. It’s so because they are at a greater risk of being sued for malpractice, like, if a patient dies!
A slight defect in a manufactured unit can lead an engineer into a lawsuit! Say, an IT engineer made a website for a company. But the website starts running into technical issues, and the engineer is sued! But PL insurance policy covers him against his unintentional workplace mistake.
A faulty design can be disastrous for an architect. Getting PL insurance protects him from the same.
#5. Real Estate Agents
Suppose the client is not satisfied with his purchased home later! He can file a lawsuit that the pitched services were not up to the mark, and the agent might end up paying for the buyer’s losses out of his pocket.
#6. Financial or Investment Advisors
If a piece of investment advice makes a client lose some money, be prepared for a hefty lawsuit. But with PL insurance, you don’t have to pay any expenses out of pocket!
PL insurance doesn’t only cover professionals offering services but also big and small companies that provide services. For example, you could be a digital marketing agency or screen printing company, etc.
Lawyers should take legal malpractice insurance in the US as it offsets any claims made against the attorney if they lose a trial!
Professional liability insurance helps in defending oneself against lawsuits of malpractices! Your mistake could be unintentional, but if a client feels wronged, it reserves the right to be heard in court!
And that’s precisely why buying PL insurance is essential to protect yourself from financial losses you might incur in such lawsuits.
I wrap up my discussion with this. If you have any suggestions or questions, write them in the comment box below!
Have you bought professional liability insurance? How is it working for you so far?
I am all ears!