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Professional Liability

Professional Liability – What Is It, And When Do You Need It?

Every occupation comes with its own inherit risks, but any time professional advice is provided to the public that could result in emotional, mental, financial, or physical anguish, there should be a higher duty of care and the correct insurance policies in place. Professional occupations such as lawyers, accountants, healthcare providers, engineers, and even insurance brokers should obtain a professional liability policy to cover their additional exposures. If a client were to sue your business or practice based on alleged negligent advice or treatment, the professional liability policy would step in.

Most businesses will have a General Liability Policy (CGL) to cover their buildings, stock, equipment, contents, and liability. If your business does not have one of these policies, we suggest you purchase one, every business should have one. However, these policies won’t cover everything under the moon for your business, there are number of exclusions. Some exclusions may be associated with perils or exposures that the insurance company isn’t interested in insuring, and that may be Canada wide. Other exclusions might be on the policy because a peril or exposure is intended to be insured on another type of insurance policy, such as automobiles, aircraft’s, terrorism, and professional liability.

Professional Liability Insurance (E&O)

Coverage Provided

  • Flawed professional advice and services that may have resulted in financial loss to the customer or client.
  • Protects professional individuals or companies from responsibility of the full cost of defending against a negligence claim and damages awarded in such a civil lawsuit.
  • Professional liability insurance covers the costs of judgments, settlements and legal defense. Damages paid under a professional liability policy are typically financial rather than physical.
  • Some of the types of professions that would need Professional Liability Insurance would be: insurance agents, consultants, brokers, lawyers, accounting firms, engineering firms, financial services, contractors or construction companies, plumbers, electricians, health professionals, etc.

Example One

You own a small Law Practice, a local entrepreneur consults with you about their business endeavors, you provide legal advice. Later the entrepreneur claims your legal advice caused him to loose $100,000 in a bad business deal. This type of policy will help cover the lawsuit and any decided settlements.

Example Two

You own a carpet cleaning service and you have been appointed to clean all the carpets at a major retailer. One location claims the products your company used to clean the carpets left bleach stains throughout the store causing the store to close down and replace all the carpets. This type of policy will help cover the lawsuit for business interruption and lost profits, and any decided settlements.

Below are two charts outlining the coverages provided for professional liability policies, and commercial general liability policies. It’s important to know the difference between the two, and also when you’re required to purchase one (or both) of the policies – we can also help with these decisions.

Another subsection of professional liability would be Malpractice Insurance, which is obviously specific to doctors, dentists, optometrists, fitness training, and other healthcare providers. Errors in these fields can present a significant possibility for bodily injury. Even the best healthcare practitioners make mistakes, and it’s important to have the correct malpractice insurance policy in place to prevent the possibility of turning a successful practice into financial ruins.

Commercial General Liability (CGL)

Coverage Provided

  • Claims of bodily injury or other physical injury (to customer or employee) or property damage that may occur at your place of business or at other locations (included in your policy) where you normally conduct business.
  • The costs to defend or settle claims – even if the claims are fraudulent.
  • Visit or commercial page for more details.

Example One

You own a small Law Practice and while in the waiting room of your office, a client burns their mouth on fresh hot coffee from the coffee machine resulting in a hospital visit to treat the burn. This policy would help cover the medical costs of your client and if the client sues your business for additional costs, such as lost wages (for being unable to attend work) this type of policy will help cover the legal costs too.

Example Two

You own a carpet cleaning service and you have been appointed to clean all the carpets at a major retailer. At one location your employee trips and falls dropping the carpet-cleaning machine onto a display case. This type of policy will help cover the cost to replace the display case and any medical treatment for your employee’s injury.

If your business is in need of a professional liability policy or a commercial general liability policy, please give us call for a no obligation quote. We’re also available to go over any questions you have regarding any business you operate, or any existing policies you currently have.