Professional Liability Insurance
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What does professional liability insurance cover?

When a dissatisfied client sues over a mistake made by your business, professional liability insurance can cover your legal expenses, including the cost of hiring a lawyer.

Professional liability insurance provides coverage for:

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Work mistakes and oversights
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Undelivered services
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Accusations of negligence
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Missed deadlines

Work mistakes and oversights

Sometimes a simple mistake can cause one of your clients to lose money. When a client sues over an error made by your business, professional liability insurance can help pay for your legal defense costs and more.

Example: An accountant incorrectly enters a company’s financial transactions into a spreadsheet, which leads to inaccurate budget projections. When the budget falls short, the company traces the mistake to the accountant and files a lawsuit. The accountant’s professional liability policy covers the cost of hiring a lawsuit and the eventual settlement.

Undelivered services

If your business promises to provide a service and fails to deliver, a client could sue – especially if it negatively impacts the client’s bottom line.

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. The company sues the consultant over its financial troubles. Professional liability insurance helps cover the consultant’s legal defense costs.

Accusations of negligence

If your business is accused of negligence, such as failing to meet industry standards, then it could face a professional liability lawsuit.

Example: An architect designs a building for a client, but the blueprint fails to meet the project’s specifications. The client files a lawsuit, accusing the architect of negligence. The architect’s professional liability insurance covers the cost of the eventual settlement.

Missed deadlines

If a professional misses a deadline, it can have tremendous repercussions for a client. Professional liability insurance provides protection when a client sues over late work.

Example: A tax preparer misses a filing deadline for a client’s tax return and the IRS fines the client. The client sues the tax preparer to recoup the cost of the fine. The tax preparer’s professional liability insurance pays for the cost of hiring a lawyer and the amount that the court rules he must pay the client.

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Professional liability insurance does not cover:

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Customer injuries or property damage
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Employee injuries
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Damage to business property
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Employee discrimination lawsuits
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Vehicles used by a business

Customer injuries or property damage

If a customer is injured on your premises or you accidentally damage a customer’s property, general liability insurance can help pay for medical expenses or the cost of repairing or replacing the damaged item. It can also cover legal expenses if the customer sues.

Example: A client trips on the front step of your insurance agency and breaks her arm. Your general liability policy can cover the cost of her medical expenses, including physical therapy and medications. If the customer refuses your assistance and opts to sue, your policy can help cover the cost of hiring a lawyer and other legal expenses.

Employee injuries

Workers' compensation insurance is the policy that covers medical expenses and partial lost wages for employees with work-related injuries or illnesses.

Example: A janitor at your cleaning company suffers a back injury from lifting a floor polisher into a van. Workers’ comp can help cover the cost of his doctor’s visit, physical therapy, and partial wages for his days off during recovery.

Damage to business property

The property coverage included in a business owner’s policy (BOP) can pay for items that are damaged, destroyed, stolen, or lost.

Example: A fire at a medical office destroys part of a building along with the company’s computers and furnishings. The property insurance included in a business owner’s policy could pay for the cost of renovating the building and replacing the destroyed items.

Employee discrimination lawsuits

Employment practices liability insurance (EPLI) can cover lawsuit expenses related to claims of harassment, discrimination, and wrongful termination.

Example: An employee at an advertising agency notices that most of the high-end clients are assigned to male workers at the agency. She sues her employer for sexual discrimination; EPLI helps cover the advertising agency’s legal costs and eventual settlement.

Vehicles used by a business

Business-owned vehicles must be covered by commercial auto insurance. Personal or leased vehicles used by a business should be covered by hired and non-owned auto insurance.

Example: A management consultant driving to meet a client in his personal vehicle gets into an accident. His personal auto insurance excludes business use, but luckily he purchased a hired and non-owned policy that covers the damage his vehicle caused.

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