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Consider 5 Critical Items For Professional Liability Insurance

Protecting your business with the appropriate insurance is critical; therefore, please consider 5 critical items about Professional Liability Insurance (PLI). Sounds simple enough, right? But it might surprise you to know that when starting a new profession or company many business professionals place insurance at the bottom of their “to do” list. Often purchasing Professional Liability Insurance is an afterthought.

Before we move to 5 critical items, let’s first define Professional Liability Insurance. How one defines this type of insurance may well depend on your profession, but here is a very concise definition provided by Wikipedia.

Professional liability insurance (PLI), also called professional indemnity insurance (PII) but more commonly known as errors & omissions (E&O) in the US, is a form of liability insurance which helps protect professional advice- and service-providing individuals and companies from bearing the full cost of defending against a negligence claim made by a client, and damages awarded in such a civil lawsuit. The coverage focuses on alleged failure to perform on the part of, financial loss caused by, an error or omission in the service or product sold by the policyholder.

Now Let’s Consider 5 Critical Items About Professional Liability Insurance

Professional Liability Insurance is sometimes considered a fluid topic. This is complicated as new professional fields come on line. In the late 1970s medical malpractice insurance often made front page news. Currently PLI policies are written for medical professionals, attorneys, engineers, insurance agents, consultants, accountants, realtor agents and brokers, construction contractors, maintenance contractors, financial advisors, technology professionals, et al. So, if you fit into this broad spectrum, here are five (5) critical items to consider:

  1. Understand your state’s requirements: Just as each of our 50 states has its own flag, so does each state set their insurance standards and requirements. These legal statutes can be unique and can vary by profession. For example, as of 2015, in eight states lawyers were subject to a disclose-to-clients requirement; attorneys must advise clients if their malpractice insurance is below a certain limit. So, do your homework. Every state provides a website that pertains to commerce and insurance; for example, here is a link to Tennessee’s Department of Commerce and Insurance.
  2. Professional Liability Insurance vs General Liability Insurance: It is vital that professionals and/or business owners understand the difference between PLI and General Liability insurance. The coverages, limits and liabilities are distinct. General Liability policies insure against bodily or personal injury or property damage. PLI policies cover claims such as negligent professional services, inferior or incomplete workmanship, broken contractual assurances, simple omissions/oversights which may result in civil lawsuits.
  3. Not all Professional Liability coverage is the same: It is very important to review the exclusions and policy verbiage. Make sure that your business and the things it does are insured under your policy. If your business is adding services it is very important to check with your insurance agent to make sure coverage exists under your policy. Professional Liability policies are specialty products, one size does not fit all.
  4. Review your PLI policy renewal: As with any insurance policy, it is critical that when you receive your renewal you take the time to review the renewal. Primarily, this will help you budget and understand that you are properly covered for the new policy period. Don’t wait till the last moment. Take time to call your agent and determine if any coverage items have changed. If the premium has increased, ask for an explanation. Make a check list. Don’t assume what you purchased a year ago is still what you need going forward. Additionally, you should be sure to renew your policy on time to avoid any lapses in coverage.
  5. Report all claims: Regardless of your profession, don’t try to second guess what claims to report. For example, according to the American Bar Association: “Report all claims. Failure to report claims could result in denial of coverage as virtually all policies have the following exclusion: ‘Any claim arising out of acts, errors, or omissions that occurred prior to the effective date of this policy if, on or prior to such date, any insured knew or had a reasonable basis to believe either that a professional duty had been breached or that a claim would be made.’ Make sure you report all potential claims to include any request to sign a tolling agreement (see the policy for a specific definition of a claim or potential claim).” 

Seek advice from the John Bailey Insurance team…

Today we’ve given you much to consider. As in a previous post we published this past February about Medical Malpractice coverage, we are hopeful that today’s post will also pique your interest and promote questions.

Undoubtedly, you have invested a considerable amount in your professional credentials and your business; therefore, having the right commercial policies, including PLI, should be part of your on-going business plan. Contact us. We are here to answer your questions and assist you in reviewing or obtaining the right business insurance coverage.

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