The "Legal-Ease" Glossary
Professional Liability Insurance
Also known as Errors & Omissions Insurance, this is a type of coverage that helps pay for lawsuits over:
- Professional negligence.
- Oversights or mistakes in your professional services.
- Breaches of contract.
If you work in the allied health or legal services industry, you may know this coverage by its other common name: Malpractice Insurance. In any case, Professional Liability Insurance protects your business in the event that it makes a mistake or oversight that causes someone else a financial loss. The policy can…
- Pay for legal defense fees, which can run you $2,000 to $5,000, even when the lawsuit gets thrown out.
- Cover settlements or judgments – no small sum when you consider that $50,000 to $100,000 is the average cost of a civil suit that goes to court for a small business.
It can be hard to imagine your small business ever facing a lawsuit, but even if you do everything by the book, you can still be wrongly accused of making a mistake that caused someone a financial loss.
For example, say you run a local newspaper. One of your reporters does a profile on a business in town, and that business doesn’t like the “light” your reporter’s words cast on the company. The company says since the profile was printed, it has suffered a downturn in sales. It sues you for defamation, and because of the nature of your business, you need to draw on your Professional Liability Insurance to address the claim.
The judge doesn’t see the profile as libelous and throws out the case. Though you don’t have to pay a judgment or settlement, you still owe a few grand in lawyers’ fees because you had to respond to the claim. Luckily, your Professional Liability policy can cover those expenses so you don’t have to pay them out of pocket.
To learn more, check out our Professional Liability Insurance blog series.
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