Professional Liability Insurance in California
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Professional liability insurance in California

Professional liability insurance coverage, also called errors and omissions insurance (E&O), protects small business owners against the cost of client lawsuits over unsatisfactory work. Although not required by state law, it's strongly recommended for professional service providers in California.

What is covered under professional liability insurance in California?

Professional liability insurance covers the cost of lawsuits related to the quality of your work, including legal fees and settlements.

It covers the following types of customer claims for many California businesses:

  • Accusations of negligence, such as an architect who creates an unsafe building design.
  • Work mistakes and oversights, such as an accountant who makes a mathematical error or fails to include the right data in their work resulting in a financial loss to the client.
  • Inaccurate advice, such as an attorney who misinterprets a legal statute that results in a costly mistake.
  • Missed deadlines and undelivered services, such as a web designer who fails to build a website before a client’s busy season.

Many California hospitals and health centers require malpractice coverage for doctors. It’s essential in a setting where a mistake could cause a bodily injury or worsen a medical condition.

Is professional liability insurance required in California?

California law does not require small business owners to have a professional liability insurance policy. However, you might need this coverage to sign a contract or to get a license in your field.

Healthcare professionals

Professional liability is referred to as medical malpractice insurance when it applies to doctors and other healthcare professionals, such as therapists. The state only requires doctors to carry this policy if they work in an outpatient surgery setting.

However, many California hospitals and health centers require malpractice coverage for doctors. It’s essential in a setting where a mistake could cause a bodily injury or worsen a medical condition.

Real estate professionals

California doesn’t require real estate agents to have E&O insurance, but clients may ask their agent to have this coverage and stipulate proof of insurance in business contracts.

Attorneys

For lawyers, professional liability is also known as legal malpractice insurance. California does not require this coverage for individual attorneys. However, the state does require proof of security for errors and omissions claims for limited liability partnerships and law corporations.

Get professional liability insurance for your California business

Who should carry professional liability insurance in California?

Any business that provides a professional service or expert advice should carry professional liability coverage, as a client could sue if your service or advice causes accidental harm. Even a frivolous lawsuit can be expensive between accounting for attorney’s fees, court costs, or a settlement.

Industries often at risk for professional liability claims include:

Technology professionals

IT consultants and other tech professionals are susceptible to lawsuits related to system downtime, data breaches, missed deadlines, and errors. They can bundle E&O insurance and cyber insurance into one policy—tech E&O—to protect against all of these risks.

Building design businesses

Those who work in building design, such as architects and engineers, are at risk of a lawsuit if a client accuses them of making a costly mistake. For example, a bridge could develop cracks over time, or a project could be delayed for months due to unforeseen circumstances.

Contractors and construction businesses

Those who work in construction and contracting, such as carpenters and electricians, could face a client lawsuit over construction delays. They could also face accusations of negligence if the customer is dissatisfied with their work or has to make expensive changes or repairs after a job is finished.

Insurance professionals

Insurance professionals, including agents and insurance brokers, deal with large amounts of financial data and at times have to use their best judgment in advising their clients. If a client doesn’t have enough coverage, or the right type of coverage, they might blame their agent or the insurance agency for failing to make sure they were protected.

Even if you’ve done nothing wrong, a disgruntled customer might file a lawsuit if your advice leads to a financial loss.

How much does professional liability cost in California?

View video transcript.

Get professional liability insurance to protect yourself from claims that you didn't deliver on a deadline, or made a costly mistake.

Some clients require you to have this policy. It can protect you from expensive lawsuits for only about 60 dollars per month.

Don't put your business at risk. Apply for your policy today!

Alert. Alert.

The average cost of professional liability insurance nationwide is $61 per month. In California, the average cost is $71 per month.

The cost of professional liability coverage depends on several factors, such as:

  • Your type of business, industry, and similar risk factors
  • Coverage limits and deductible
  • Your business size and location
  • Day-to-day operations
  • Your claims history

How does professional liability insurance work in California?

Professional liability insurance covers your legal defense costs if you’re sued over a mistake in your professional work, and it's affordable for low-risk businesses.

Even if you’ve done nothing wrong, a legal battle can be expensive. In addition to your attorney’s hourly rate, you’ll likely be charged for administrative costs such as copying, filing, and travel expenses. You may also have to pay for expert witnesses to testify on your behalf, a court-ordered legal judgment, or a settlement to avoid trial.

Professional liability insurance covers all of the above, up to the coverage limits of your policy. The policy limits you choose should take into account how expensive it can be to fight a professional liability lawsuit. You also need to determine the amount of coverage required to obtain a contract or work in a certain field.

For example, healthcare professionals in California will likely need liability limits of $1 million per claim, and $3 million in aggregate per year.

Are there any exclusions in professional liability insurance?

A professional liability policy covers a wide range of lawsuits, but it will not cover intentional harm you cause to others. Most insurance companies exclude:

  • The illegal violation of any law, regulation, or statute
  • Any services you provide under the name of another entity, such as a subsidiary business or organization not listed on your policy
  • Defamation, such as libel and slander
  • Discrimination

Does general liability insurance include professional liability coverage?

General liability insurance does not include professional liability coverage. General liability covers common business risks and liability claims such as customer injuries, customer property damage, and advertising injuries.

If a customer falls and suffers an injury at your workplace, it would be covered by your general liability policy, which would include your legal defense costs. If someone sues you over unsatisfactory work, it would be covered by your professional liability coverage.

Read more about general liability vs. professional liability insurance.

What other types of insurance should CA businesses consider?

General liability and professional liability are often the first two policies bought by small business owners. However, they are not the only types of insurance that policyholders might need.

Workers’ compensation insurance is required for all employers in California, even if the company only has one employee. It covers medical costs and lost wages for work-related injuries and illnesses.

Commercial property insurance covers your business’s physical location and equipment. It’s often required to sign leases.

A business owner’s policy (BOP) combines general liability coverage and commercial property insurance. It's usually less expensive than buying each policy separately.

Commercial auto insurance is required in California for any vehicles used solely for work purposes.

Cyber insurance covers the cost of dealing with a data breach or malicious software attack.

Employment practices liability insurance (EPLI) will protect against lawsuit expenses related to claims of harassment, discrimination, and wrongful termination that professional liability typically won’t cover.

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Professional liability vs. malpractice insurance

Professional liability and malpractice insurance both protect against professional liabilities a business might face. However, they cover two separate types of claims, and you may need to purchase one or both policies depending on your risks.

How do I get professional liability insurance for my California business?

Complete Insureon’s easy online application today to compare insurance quotes from top-rated U.S. providers. Our California licensed insurance agents can help answer any questions and provide advice. Once you find the right small business insurance, you can begin coverage in less than 24 hours.

Updated: July 26, 2023
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