Professional liability insurance is coverage that protects business professionals such as attorneys, consultants and accountants from claims of negligence or misconduct related to the services they provide. It’s often referred to as errors and omissions (E&O) insurance.
Experts in a specific field typically require professional liability coverage because their services can lead to mistakes that can cause financial or indirect loss for their clients. These types of incidents are typically excluded from other business insurance coverages.
What is errors and omissions insurance?
Errors and omissions insurance (E&O) is a type of professional liability insurance that protects a business from customer claims of negligence or inadequate work related to the professional advice and services they provide.
An E&O policy can cover legal fees and settlement costs associated with these claims, even if a mistake wasn’t made. Real-estate agents, home inspectors, consultants and other professionals who sell a service might need this coverage.
What does professional liability insurance cover?
Professional liability insurance covers claims of actual or alleged negligence that arise from providing professional services, like giving incorrect advice, an omission, or failing to deliver a service. This coverage includes damages and defense costs up to your policy limits, regardless of whether a mistake was made.
For example, a client claims an accountant filed their taxes incorrectly and caused them to lose a lot of money. The accountant’s professional liability insurance could help cover the legal and settlement costs.
Many professional liability policies are written on a claims-made basis, which means that coverage is only afforded to claims filed during the policy period. A retroactive date may be added to cover incidents that occur before a policy’s coverage begins.
Professional liability insurance coverage can protect against claims that arise from services provided in the past and for work performed anywhere in the world.
It’s important to understand that professional liability won’t cover claims related to injury to others or damage to their property. General liability provides this type of protection. Learn the difference between general and professional liability coverage.
Who needs professional liability insurance?
Any business that sells a professional service or gives advice should consider professional liability insurance to protect against lawsuits that arise from their mistakes.
Some states legally require that certain professionals, such as lawyers, have it before they can do business. Clients might also require that a business carry a certain amount of professional liability as part of their business contracts.
A variety of business professionals need professional liability insurance including:
- Real estate agents
- Insurance agents
- Home Inspectors
Is errors and omissions insurance the same as professional liability?
Yes, there’s no difference between errors and omissions insurance (E&O insurance) and professional liability insurance; the two terms are often used interchangeably.
Will professional liability cover me even if the lawsuit is baseless?
Yes. Regardless of whether a claim against you is determined to be frivolous or not, your professional liability coverage would defend against a lawsuit claiming your professional neglect.
What’s the difference between professional liability and general liability coverages?
General liability coverage only protects against “third-party” damages for which you’re responsible (i.e. bodily injury to others or damage to their property ). Professional liability protects you from claims of neglect or professional errors.
Texas is big! It’s filled with diverse people, environments, weather, and homes. With so many different ways to live, your insurance needs to be flexible enough to cover the way you live. Kelley Insurance Agency, offers a variety of customizable property and liability insurance products, coverages, and endorsements. Our staff is here to help when you are considering our Home Based Business Insurance coverages.