Professional Liability Insurance

What Does Professional Liability Insurance Cost?

Professional liability costs will vary by carrier and profession. Rate factors generally include:

• Services provided.
• Customer demographics.
• Company size and location.
• Prior claims or lawsuits.
• Quality-control procedures, such as the use of contracts and employee training.

What are Common Professional Liability Claims?

According to the National Ethics Association some of the most common and costly E&O claims for most professionals stem from the following reasons:

• Inadequate communication and documentation, assuming your client is up to speed or on the same page as you are is a costly mistake! Lawsuits are won and lost by proper documentation.
• Misrepresentation, portraying oneself as more experienced or more qualified than you are is a big risk. Or perhaps you failed to thoroughly explain a policy provision or made an error in a client application, these are also misrepresentation claims.
• Inadequate coverage, whether you are a financial advisor, insurance agent or real estate broker, you are at risk if you fail to address all the needs of your client, leaving your client open to perils.
• Breach of duty, anytime you fail to act on the behalf of your client or fail to live up to any of the duties outlined by your profession, you are essentially not performing your duties as contracted by your client and thereby open for a claim.
• Inadequate business practices, many claims arise due to someone’s lack of knowledge, action, attention, communication, concern, consistency or control. Making sure you and your staff are well trained and supervised are extremely important.

How Can I Reduce my Risk?

Reducing risk for professional liability claims can be simply stated, but harder to practice. Overall, if you’re insuring as an individual you’ll find it easier to reduce risk than if you work with partners or a staff. There are a lot of risk management strategies specific to each profession, too many to list here. However, there are five strategies that almost everyone can implement in their business to reduce the risk of E&O claims.

1. Represent yourself accurately. Marketing and solicitation materials should not inflate your abilities or misrepresent your business in any way.
2. Document everything! This is a common risk mitigation method. If you document your client’s needs and have them sign off on them, you can assure that those needs will be covered and nothing will be left out or exposed for a claim.
3. Educate your clients. Make sure your clients know what they are getting from you. Whether it is a service or advice, giving them clear expectations is important to prevent any confusion at delivery or end of service.
4. Stay in your lane. Don’t give advice or services that aren’t in your specialty, even if your client says they trust you.
5. Document everything! This one is just so important. Having documentation of change orders, key decisions, refusal of services or any other variable specific to your profession can make or break a lawsuit. It is also good practice and good customer service to keep track of these transactions. While trust is important in business, so is your livelihood, and your client won’t hesitate to sue, no matter how long they have known you or how many good faith handshakes you’ve exchanged.

Frequently Asked Questions

1. What are some of the other terms used for professional liability insurance?

Errors and Omissions (E&O) is the most generic of the terms. Other, more specific terms, cover more specific professions. For example, doctors and lawyers would use the term malpractice insurance.

2. What does E&O coverage exclude?

Aside from bodily injury and property damage (some exceptions in medical malpractice coverage), there are a few excluded coverages in professional liability insurance policies. Fraudulent or illegal actives or intentional acts of negligence will never be covered. Also, while E&O will cover services and advice given in the technology industry, it will not cover losses such as data breach or equipment malfunction.

3. Will professional liability cover a meritless lawsuit?

Even if the suit is meritless, unfounded or frivolous you will still need to mount a defense, which is exactly why you need E&O insurance.