Professional liability insurance

Professional liability insurance for accountants and auditors covers the costs of lawsuits based on accounting errors, data entry errors, miscalculations, or lost documentation.

For example, if an accountant incorrectly enters a client's financial transactions into a spreadsheet and the budget falls short, the client may trace the mistake back and file a lawsuit. Professional liability would cover the accountant's cost of hiring a lawyer.

Because the policy offers indirect financial protection for the client, some clients will require proof of insurance before they agree to work with your firm.

Professional liability insurance protects architects against a wide range of accusations, including that a building design didn't meet project specifications, was delivered late, or contained errors.

For example, if an architect designs a building for a client and it fails to meet the project’s specifications, the client could accuse the architect of negligence and file a lawsuit.

Some client contracts might include a clause that requires professional liability insurance coverage.

Professional liability insurance for consultants offers financial compensation for lawsuits alleging ineffective advice or inaccurate projections.

For example, a management consultant promises a 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. Professional liability insurance would help cover the consultant’s legal defense costs if the client sues the consultant over its financial troubles.

Some clients may ask for proof of professional liability insurance before they agree to work with a consultant.

Professional liability insurance for engineers provides financial protection from lawsuits over disputes such as cost overrun, delivery delays, and problems with construction materials.

For example, an engineer promises that a building extension for a client will be completed by a certain date, but a concrete delivery issue forces the project completion to be delayed by a month. Professional liability insurance would help cover the engineer's cost of hiring a lawyer if the client files a lawsuit over the missed deadline.

Engineers may need to provide proof of professional liability insurance to a client, partner, or licensing board for some projects.

Professional liability insurance for healthcare professionals offers the protection your healthcare business needs to continue providing its services while handling a lawsuit. In this industry, it's called medical malpractice insurance.

For instance, if a patient claims that neglect from a nurse caused bed sores, they could file a lawsuit against them. Professional liability insurance would cover legal expenses for the nurse, such as the cost of hiring an attorney.

Some states require malpractice insurance for doctors and other medical staff. More often, the facility where you work will require you to carry a certain amount of this coverage.

There are typically a couple different scenarios when a business may be required to have professional liability insurance coverage.

Clients may request a certificate of insurance as proof that you have coverage in order to secure a contract. This way, they know that in the event that you make a costly mistake or don't meet their standards, they will be able to recoup their losses.

Additionally, if you decide to apply for certain professional licenses, many states will require that you hold professional liability insurance before you can submit your application.

Having a certificate of insurance makes it easier to establish trust in your business, as you can then show licensing boards, clients, and others that if you make a mistake in your professional work, you’re able to pay for any negative outcomes.

Professional liability insurance will help provide indemnity for legal costs in the event that a client files a lawsuit against you over an accusation that you failed to meet expectations.

To make a professional liability claim, you can call your insurance provider. They will then ask you to provide some basic information, such as a description of the incident and your policy number.

Most professional liability insurance policies are written on a claims-made basis. 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

If you want coverage for work you've done in the past, you can ask your insurer to set a retroactive date for your policy. Continuous coverage is key 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. You will sometimes see professional liability insurance called errors and omissions insurance (E&O), even though the policies are identical except for the name.

The term E&O insurance is used most often for insurance agents, real estate agents, tax preparers, and IT professionals.

Lawyers and doctors refer to this policy as legal malpractice or medical malpractice insurance, respectively.

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

General liability insurance 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.

If you want to learn more about this policy, you can find additional answers in our frequently asked questions about professional liability insurance.

If there are any additional questions you have about coverage or building a risk management plan, you can also contact an Insureon agent.