Professional liability insurance, sometimes called errors and omissions insurance (E&O) or malpractice insurance, is designed to protect certain professionals and businesses from liability claims made by clients or customers. Claims covered by professional liability policies might include copyright infringement, negligence, common mistakes, omissions, and/or misrepresentation. Professionals who operate their own business (e.g., accountants, attorneys, doctors, architects, and others) may need professional liability insurance to protect them from liability for mistakes made in the performance of their professional services. Both small businesses and large corporations can use professional liability insurance to cover the costs for claims made for financial loss due to negligence, misrepresentation, copyright infringement, or certain personal injury (e.g., libel and slander, among other claim types).
Differences Between Professional Liability, General Liability, and Other Types of Business Insurance Policies
It is important to understand what is and is not covered by the standard professional liability policy and how to fill coverage gaps between the two. For example, professional liability policies and general liability policies cover different risks. Professional liability policies cover more abstract or financial harms resulting from a professional’s advice or services. A client may sue a professional if the client decides the service provided did not have reasonable or expected results. A general liability insurance policy, by contrast, protects insureds from lawsuits where the insured’s work results in a physical harm, including bodily injuries and property damages.
Professional liability policies can protect against a wide range of risks and lawsuits (e.g., work mistakes, oversights, negligence, missed deadlines, or undelivered services). However, these policies do not cover a company’s employment practices, illegal acts, work-related bodily injury, property damage, or work-related illness. Because of these differences in coverage, a business may not be fully covered without carrying multiple types of insurance. Payne & Fears regularly helps clients identify these types of gaps in coverage portfolios to increase their level of protection.
What Kinds of Problems Arise With Professional Liability Claims?
Many coverage disputes arise out of whether the insured properly tendered, or made a request for coverage, to the insurance company. We regularly assist clients with initiating and navigating the insurance claims process to ensure that they receive their policy benefits. While there is no magic formula for tendering to an insurance company, it is best to err on the side of caution and tender early and often. Professional liability policies are “claims made” policies, which means that the policy provides coverage for claims made against the policyholder during the policy period. Insurers often try to avoid providing policy benefits by arguing that the tender is late or was not provided in the manner specified by the terms of the policy. We advise our clients to tender as soon as they have notice of a potential claim and to provide all available information with a clear request for coverage. This regularly allows us to defeat these types of arguments by showing that the tender provided adequate notice within the applicable time, even if the tender did not contain any “magic words.” Payne & Fears attorneys are fluent in the intricacies of professional liability and errors and omissions policies. We can help position clients to procure the right coverage as well as obtain policy benefits in a timely and efficient manner, thereby increasing clients’ ability to win any coverage disputes.