Are you a professional?
Professional is an ambiguous term. If you are employed, aren’t you considered to be a “professional” in that field? For insurance purposes, a professional is anyone that has a liability exposure that could be incurred as a result of errors and omissions in performing their professional services. Individuals or businesses with this exposure should consider purchasing professional liability (also known as errors and omissions) insurance.
Doesn’t my general liability cover that?
General liability policies are intended to protect you for property damage or bodily injury claims arising from your business’ or employees’ negligence. The general liability policy does not necessarily exclude coverage for professional services, but professions with high exposure of bodily injury and property damage (e.g. architects or doctors) will have a professional liability exclusion endorsed onto their policy.
While some professions understandably have this exclusion, insurance companies are adding this endorsement onto many other general liability policies that you may not expect. Make sure you ask your agent to review your policy to see if you could have a potential gap in your coverage.
What about financial losses?
The most common need for professional liability is an exposure of economic or financial losses suffered by third parties due to your negligence. As outlined above, your general liability policy will only cover you for property damage or bodily injury. If a third-party were to sue you for a financial loss they incurred due to your professional services, your general liability will not respond.
Insurance agents, accountants, lawyers are common professions who have this exposure and need a professional liability policy. In addition, as more and more people transition into the “gig economy”, many people are unwittingly taking on professional liability exposures. Sites like guru and fiverr allow individuals to work as freelancers offering services from marketing and graphic design to business consulting and programing.
If you are hired to design a logo or a marketing campaign for a business and they are sued for copyright or trademark infringement that company can come after you for lost revenue and damage to their brand suffered because of your mistake. A business consultant can be held liable for financial loss because of bad advice they provided to the company that hired them. A freelance programmer can be held responsible for finical losses incurred if the program doesn’t work as expected or if a flaw in their software opens the company up to a cyber breach.
Financial losses can quickly add-up for businesses due to business interruption and damage to a company’s brand or image. If a freelance professional does not have the proper insurance coverage in place, they can be held personally liable for any financial losses caused by their negligence.
Other reasons professional liability is a good idea
The most important feature of any liability insurance policy is the duty to defend. An insured only needs to show that there is a potential for coverage under their liability policy and the insurance company is obligated to defend that insured against claims made under that policy. Even if you feel like you have a low exposure and/or it is unlikely that you will make a mistake that causes financial loss, that does not prevent someone from filing a claim against you or your business. Without the proper coverage in place, you will have to hire a lawyer to defend yourself. Many professional-related claims require significant amounts of legal research and litigation. If you are forced to pay a lawyer out of your own pocket, as opposed to having your professional liability insurance company defending you, you may not have the financial resources to bring the suit to trail. You could be forced to settle and/or close your business because of an obvious frivolous claim.
Another important reason you should consider a professional liability policy is that many companies will require that you provide proof of insurance before they will hire you. I have worked with many professionals that have spent a significant amount of time and effort landing a consulting gig only to find out that as a condition of the contract they must provide evidence of professional liability insurance. The underwriting requirements for many of these policies take time to complete and process. You don’t want to lose a contract at the eleventh hour because you do not have the correct professional lability coverage in place.
If you have questions about your professional liability exposure, are unsure if your general liability policy has a professional liability exclusion, or are just wondering what is involved with getting a professional liability quote for your business, call Shove Insurance today. We will review all your options and work with you to find a policy that fits your needs and your budget.