What Does Professional Liability Insurance Not Cover?
Professional Liability Insurance coverage can address lawsuits over work mistakes, but it usually doesn't cover…
- Intentional wrongdoing.
- Illegal acts.
- General liabilities.
- Employee injuries.
- Employment disputes.
- False advertising.
- Property damage.
You can check out "Professional Liability Insurance Defined: Who Needs it and How it Protects Small Businesses" to learn about what the policy can cover. For now, let's look at some events this policy usually excludes.
1. Intentional Wrongdoing
Clearly, you want to always maintain your professional standards – if only to protect your business reputation. But if that's not reason enough, you might also want to think about your Professional Liability coverage. Intentional wrongdoing – i.e., knowingly causing damage – is almost always excluded.
You might have a strained relationship with a client, and the temptation to "accidentally" miss important meetings or offer incomplete advice might be hard to resist. But if there's proof that you knowingly set out to cause your annoying client harm, your Professional Liability Insurance likely won't cover the claim.
2. Illegal Acts
Professional Liability coverage doesn't cover illegal acts. It may be hard to imagine yourself doing something illegal, so let's look at an example.
Say a new consulting firm opens down the street from your shop. They actively target your client list with similar services offered at steep discounts. You're losing clients left and right.
In an act of crazy desperation, you hack into their system to send a "going out of business" email. But here's the rub: your Professional Liability coverage won’t protect you from an angry lawsuit over cyber sabotage.
3. General Liabilities
Another thing Professional Liability Insurance can't cover? Regular accidents that aren't related to your work. For example, say a client trips on a power cord and breaks her wrist while visiting your office. That bodily injury isn't related to your professional services, so you'll need General Liability Insurance to address this lawsuit.
Also known as “slip-and-fall insurance,” General Liability can protect your business from third-party lawsuits over accidental bodily injuries, reputational damage, and property damage. For more on the difference between these policies, read "General Liability Insurance vs. Professional Liability Insurance."
4. Employee Injuries
If an employee breaks his wrist while tripping over that pesky power cord, don't look to your Professional Liability coverage for help. It won't cover employee injuries. To help pay for occupational injuries, you'll need Workers' Compensation Insurance.
5. Employment Disputes
Professional Liability Insurance coverage can cover mistakes your employees make while providing skilled services on behalf of your business. However, this type of insurance can't cover disputes you have with employees.
So say you decide to promote a young consulting whiz to a managerial position. An older employee accuses you of passing her over for the promotion because of her age. If she sues you over age discrimination, you'll need Employment Practices Liability Insurance, not your Professional Liability coverage.
6. False Advertising
Professional Liability Insurance doesn't cover false advertising. So let's say you concoct an advertising campaign that emphasizes your Ivy League education to bring more clients to your consulting firm. Unfortunately, the closest you've ever been to one of these top schools is reading the Harvard Business Review.
Once customers realize you've falsely advertised your experience and education, they sue, and your Professional Liability coverage can't protect you.
7. Property Damage
Your Professional Liability Insurance doesn't cover property damage. So if someone breaks into your office, steals your computers, and vandalizes the walls, you'll need Property Insurance to help you out. This policy can compensate you for business property that is lost or damaged because of theft, fire, or some weather-related events.
Professional Liability Insurance may not be useful for these seven events, but here are some situations when you'll be glad to have it: "3 Real Cases Where Professional Liability Insurance Came in Handy."