Professional Liability insurance funds losses caused by errors or omissions in the rendering of services. What does this mean? Professionals are human and errors do occur. In medicine and science, the client benefits from the best course of action suggested by an experienced practitioner at the time the service is rendered. The best course of action, though, has some risk of failure. It is wise to cover this potential.
Some examples of typical professional liability claims include: An attorney misses a filing date for a lawsuit and the client loses the right to sue a surgeon removes too little, too much, or the wrong tissue. A hair stylist misuses chemicals and burns the client. A computer consultant provides incompatible software, causing damage.
Some examples of actual, but unusual claims: Although machinery is tagged as under repair, a building inspector is held responsible for a new system because they merely reported the tag-out rather than investigating the nature of the repair required. A real estate agent sold a home that the listing agent reported as located in the wrong school district. The selling agent did not correct the error although they were never asked to verify the information. A stockbroker advises a client to sell some stock and balance their portfolio. The client refuses and loses money. The client sues for mismanagement.
Most professional services contracts offer advice, design, expertise, politics, negotiations, or any skill associated with a particular profession. Beyond laws and regulations, professions self-govern by way of setting minimum performance and ethical standards. When these performance standards are not met, either by an error occurring or an omission of an important service duty, a potential claim results. Expert witness testimony is often a feature of litigation in these claims to determine the definition and scope of the malpractice.
Doctors, lawyers, and certified public accountants (CPAs) spring to mind when discussing Malpractice insurance, Professional Liability, or Errors & Omissions insurance. How about architects, engineers, office designers, barbers, dog groomers, bankers, clergy, web site designers, software producers, or computer consultants? Any profession that provides a service instead of a product has a professional liability exposure. Almost any product includes some element of design. So, what separates a product from a service?
A service is defined by the acts of the professional, not by the finished product or outcome. Concrete contractors are covered by completed operations insurance; construction managers who select and supervise the concrete contractor fall under professional liability. If you provide a professional service, advise clients, act on behalf of a client, or provide an outcome or consequence rather than a specified product or completed operation, you need Professional Liability insurance.
Professional Liability policies define the acts, errors, and omissions covered both in general and specifically. Restrictions or exclusions are enumerated as well. Standard forms exist for many professions; however, different forms are used and it pays to have knowledgeable advice.
Reputation creates value in any professional practice. One major difference between standard business and professional liability is the professional’s right not to settle. The downside to this decision, however, is the policy limit of liability decreases for that claim to the accepted claim offer, including costs and legal fees, a very risky strategy. Claimants and their legal counsel prefer to negotiate with an emotionally distraught practitioner than a dollars and cents experienced adjuster who knows the potential court outcome.
With reputation and time away from the practice already at risk, remove the strain of total financial ruin from the equation and obtain Professional Liability insurance.