Professional liability insurance

Professional liability insurance, also called errors and omissions insurance (E&O) or malpractice insurance, is designed for businesses that make a living by providing professional services or advice.

Even the most experienced and thorough professional service provider makes mistakes. Unfortunately, clients may not be so understanding if your error costs them considerable time or revenue.

Professional liability insurance coverage helps protect you from unsatisfied clients. For example, if you miss a project deadline, make an omission in your work, or provide ineffective business advice, your client may sue.

If you’re served with this type of lawsuit, your professional liability insurance policy will cover legal defense costs up to your policy limit.

It's inevitable that you will come across unsatisfied customers. However, when a customer claims your mistake or negligence cost them revenue, you may end up in court.

Professional liability coverage protects you against:

If your small business provides any type of professional service or advice, you should get professional liability insurance coverage.

By providing these services or advice, you're at risk of a client accusing you of unsatisfactory work, including missed deadlines. If a client sues, the costs can cause severe financial damage to your small business—whether or not you’re at fault.

Any small business owner, from IT staffing agencies to law firms, that makes a living by providing their expertise only benefits from carrying this policy as part of its risk management plan. And that’s even more true if your work or advice could potentially cause a client financial loss.

That's why professional liability is especially key for small businesses that provide advice or professional services, including:

Professional liability protects IT professionals, such as software developers and cybersecurity experts, from lawsuits over contract disputes, missed deadlines, and more. Some clients will require IT companies to prove they have an active professional liability policy before they agree to work with them.

For example, an IT consultant promises a real estate company that it will improve its profits by 20% by a certain date. When the date arrives, profits have gone up, but not as much as projected. The company sues the IT consultant over its financial troubles. Professional liability insurance helps cover the consultant’s defense fees.

Many tech professionals will purchase a policy that combines cyber liability insurance with errors and omissions coverage into one policy: technology professional liability insurance, most often referred to as tech E&O.

Professional liability for consultants covers lawsuits over advice, recommendations, and guidance provided to clients. This can be helpful for IT consultants, as well as other types of industry consultants, such as management, education, and more.

For instance, a marketing consultant is hired to advise about improving workflow processes, but the client is dissatisfied with the recommendations and decides to take legal action. Professional liability insurance would cover the consultant's legal defense costs.

A professional liability policy helps healthcare businesses and professionals with the high costs of medical malpractice lawsuits.

For example, if a nurse incorrectly administers a medication to a patient and ends up causing increased medical expenses and personal injury. The patient may sue, and professional liability insurance coverage would help cover the legal fees.

Professional liability covers media, marketing, and advertising professionals if their clients are unhappy with the services provided.

For example, if an advertising agency takes on a campaign for a business but fails to complete the contract as agreed upon, the client may take legal action to recuperate costs. Professional liability insurance would help the advertising agency with lawyer and court fees.

Professional liability coverage provides protection for design service professionals that don't meet clients' expectations or fail to complete a project as agreed-upon. It also covers lawsuits related to design mistakes, including unmet client expectations and other design-related issues.

For instance, a web design company is tasked with designing a new website for an e-commerce company. When the project takes longer to complete than promised, the e-commerce company sues the web design company over the potential lost profits. Professional liability insurance would help pay for attorney's fees and any other legal costs.

Professional liability protects your small business against financial costs from unsatisfactory work, but it doesn't cover all risks associated with running a business.

To fully safeguard your small business, you should get other business insurance policies to protect against these common risks:

TechInsurance is a trusted insurance expert for all small businesses, including contractors and consultants, with extensive knowledge of the IT sector.

With TechInsurance, you can easily download a certificate of liability insurance for your small business, often on the same day you buy errors and omissions coverage or another insurance product. TechInsurance insurance agents are available to help you with this process.

This comes in handy for companies and consultants that need proof of insurance to sign a contract or a lease and don’t have time to call an insurance company for documentation. Clients and landlords may ask for a certificate of professional liability insurance to show you’re insured.

A professional liability insurance policy provides indemnity in the event that you or your business incur legal costs from a lawsuit where a client claims that there was some sort of missed expectation.

If a client reaches out and tells you they plan to take legal action, you'll need to make a claim with your insurance provider.

To make a claim, you'll first want to contact your insurance carrier and give them the basics of the incident along with your policy information.

Your insurance company will work with you to handle the lawsuit and weigh your options about answering, dismissing, or settling the claim.

It's important to keep detailed and thorough records through the whole process to ensure your side is adequately represented.

Though it may be tempting to drop your professional liability coverage to save money, maintaining your professional liability coverage is key to keeping your business protected and having peace of mind.

Many professional liability insurance policies are written on a “claims-made” basis with a retroactive date. This means that in order to collect your insurance benefits, your professional liability policy must be active:

• When an alleged mistake occurs, and
• When the claim is filed

With a claims-made professional liability policy, your coverage kicks in only when you file a claim during the policy period. Continuous coverage is a must if you don't want to pay out-of-pocket for lawsuits.

The short answer is no. Different industries use different terms for the same type of coverage.

Professional liability insurance and errors & omissions (or E&O insurance) are essentially identical, except for the name. There are a few other industry terms for it as well:

• In the medical field, this policy is commonly known as medical malpractice insurance.
• It's called media liability insurance in the media and advertising industry, where it also covers advertising injuries.

Read more about the differences between errors and omissions insurance and professional liability.

General liability insurance and professional liability insurance both protect against common small business liability claims, but they cover different types of lawsuits.

A general liability policy covers customer bodily injuries, customer property damage, and advertising injuries. In contrast, professional liability insurance covers any legal defense costs when a client or customer suffers a financial loss due to your professional services or advice.

You can bundle general liability insurance with commercial property insurance in a business owner's policy (BOP). By bundling the two together, you can save money.

Learn more about the difference between professional liability vs. general liability insurance.

Professional liability insurance has some coverage limits and exclusions. For instance, it doesn't pay for lawsuits that allege client discrimination or abuse.

It also only covers the cost of defending against lawsuits. It does NOT pay for lawsuits you initiate. For example, this policy won't cover your legal costs if you sue a client who refuses to pay you.

Unless your policy has prior acts coverage, it only covers claims filed while the policy is active and for incidents that occurred after you bought the policy.

Endorsements can fill gaps in your professional liability coverage. To make sure you have the coverage you need or to ask any questions you might have about your coverage options, contact a TechInsurance agent.