What Is Professional Liability Insurance?
Professional liability insurance, or errors and omissions (E&O) insurance, is a type of business liability insurance that protects your business from lawsuits arising from the professional services or advice you provide. Essentially, it protects you against the costs of legal defense and judgments that come from a client suing you, whether you made a mistake or not.
Examples of When It Could Be Used:
- You are an attorney and are sued by your client for not interviewing critical witnesses.
- You own a real estate company, and one of your agents misinforms a buyer about a material fact about a property.
- You are a doctor and are sued by a patient for providing the wrong medication.
What Professional Liability Insurance Covers:
- Negligence
- Misrepresentation
- Violation of good faith and fair dealing
- Inaccurate advice
- Personal injury (libel, slander, defamation)
What Professional Liability Insurance Doesn’t Cover:
- Bodily injury or property damage to others (covered by general liability coverage)
- Work-related injuries or illnesses (covered by workers’ compensation)
- Data breaches (covered by cyber liability insurance)
Who Should Have Professional Liability Insurance?
1. Businesses that provide professional services or advice to clients.
- Consultants
- Nurses/Doctors (called medical malpractice insurance)
- Agencies (real estate, advertising, graphic design, etc.)
- Lawyers (called legal malpractice insurance)
- Architects
- Accountants
2. A business contract that requires you to have it.
3. Your state requires it.
Two Types of Professional Liability Policies:
1. Claims-made (most common): this policy only covers claims made during the period of coverage.
- A retroactive date can be added to cover incidents that occurred before a policies coverage begins.
- An extended reporting date can be added to cover claims after your policy expires.
2. Occurrence: this policy covers any claim for an incident that took place during the period of coverage, even if the lawsuit is filed after the policy expires.
How Much Does Professional Liability Insurance Cost?
The amount of insurance you will need and how much it will cost depends upon many factors including your business type, size, location, claims history, coverage limits, and more.
If you are interested in discussing your professional insurance liability options, request a free E&O insurance quote below and an MSIG insurance agent will be happy to work with you to find a policy that fits your needs.
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As an independent agency, we are here to help you find the right coverage.
