Does Professional Liability Insurance Cover Negligence?

If your business involves giving professional services or advice to your clients, you’ll want to go the extra mile to ensure that you’re protected against any claims of negligence that may be brought against you.

Professional liability insurance, or errors and omissions insurance (E&O insurance) protects business owners and professionals such as doctors, lawyers, and accountants as it can help to mitigate any major financial loss that can occur from not having the correct protection.

Related: Differences Between E&O & Professional Liability

What does professional liability insurance cover?

Professional liability insurance covers three basic things:

1. Negligence

This refers to any failure to take the proper care in your work, whether it’s not taking enough care of industry standards or poor advice that causes a client financial harm or bodily injury.

2. Undelivered goods or services

If you’ve failed to deliver goods or services to your clients or customers, they can come after you for any damages that may have incurred from you not holding up your end of the deal.

3. Work mistakes

Professional liability insurance also covers claims of any mistakes you or your employee may have made while on the job, such as misinformation on a spreadsheet or a faulty piece of electronic equipment.

Even if these mistakes come at no fault of your own, having professional liability insurance covers any legal defense from these types of claims, as well as a considerable amount of any potentially destructive payouts you may be required to pay.

Related: Why do you need business insurance?

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What isn’t covered under professional liability insurance?

No claims for criminal prosecution are covered under professional liability insurance. This means that if a professional is willfully and knowingly committing a fraudulent act, their insurance policy won’t cover any legal fees or penalties that go along with that.

Most professional liability insurance also doesn’t cover any claims for incidents made before the policy began.

There are two types of professional liability insurance:

1. Claims-made policies

The most common of professional liability insurance policies, this policy type protects from any incidents that happen while the policy is in effect.

2. Occurrence policies

While less common, occurrence policies can help those who no longer hold their claims-made policies but want to remain protected from any claims that may arise during the period the policy was in effect.

While most policies don’t protect you from any incidents that may have happened at a retroactive date, occurrence policies offer a way to protect yourself from claims made after the policy has ended.

Do I need professional liability insurance?

Professional liability insurance is important for any working professional who offers advice or services for a fee. A few of the many professions that should look into getting this type of insurance include:

• Consultants

• Accountants

• Pharmacists

• Doctors

• Architects

• Graphic Designers

Since this is by no means an exhaustive list, be sure to talk to your insurance broker to see if professional liability insurance can help protect you and your business.

Related: How much professional liability insurance do I need

Is professional liability insurance the same as general liability insurance?

Professional liability insurance and general liability insurance are different in one main way: While general liability insurance covers customer injuries and property damage, professional liability insurance covers any claims of loss of income due to any goods, services or advice that may or may not have been provided.

While the main difference is in the type of damage that’s alleged to have occurred, it’s a good idea to protect yourself and your business by having both of these policies.

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Related: What is professional liability insurance?

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