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Claims under professional liability insurance policies (also referred to as errors and omissions, E&O, or malpractice risks) arise when policyholders find themselves the target of alleged professional negligence. Professionals who operate their own businesses (e.g., accountants, attorneys, doctors, architects, and others) are subject to professional liability risks because their jobs involve offering advice or guidance within a certain area of concentration. Negligence in this area may cause financial loss for clients or even bodily injury for people who employ a professional to help them with physical concerns.
Professional liability policies are designed to cover liability for financial losses created by an error or oversight by a professional providing services as a sole practitioner or for a business that employs professionals. Professional liability claims may arise out of a number of circumstances, including professional negligence, mistakes, oversights, misrepresentations, inaccurate advice, missed deadlines or undelivered services. For example, a tax preparer may miss a filing deadline, an architect may prepare plans that fail to meet specifications or comply with relevant codes, or an accountant may make a math mistake or provide poor advice that exposes her client to harm. These kinds of mistakes can have severe impacts on a client’s business. A professional liability insurance policy will cover the cost of defending against claims arising out of these events and resolving these claims, either by funding a settlement or satisfying a judgment.
Professional Liability Claims: Trigger of Coverage
In order to trigger coverage under a professional liability policy, there must be an allegation that you or your business made an error or omission in the course of rendering professional services that resulted in harm to a third party. Because of conditions unique to claims-made insurance policies and draconian penalties for failing to comply with these conditions, it is important to notify your professional liability insurer as soon as you have notice of a potential claim; failing to do so may result in forfeiting coverage. Whether, and to what extent, the claim is covered will depend on several factors. These include, for example, whether the claim was made during the policy period, whether an exclusion in the policy precludes coverage, whether the claim resulted from rendering inadequate professional services, or whether the claim seeks damages covered under the policy.
Professional Liability Claims: How We Can Help
Payne & Fears attorneys are fluent in the intricacies of professional liability policies and have decades of experience helping policyholders navigate the insurance claims process, including providing strategic advice about coverage issues that may arise and helping identify other culpable parties and risk-transfer opportunities.