Index | Liability Insurance | Professional Indemnity
"Professional" is the term generally referred to people whose occupation demands extensive academic training and who provide services of high quality. However, when we talk about "professional negligence," this word is used in a broader sense to describe the negligence of persons who are involved in any professions, businesses, and trades which require specialized skill, knowledge, or experience, and offer their services to public. Therefore, an action for Professional Liability may be based not only on cases when a professional holds advanced academic degrees, but also on cases when services are rendered by any person who claims to have special knowledge in the area in question.
Persons who provide professional services to public have an additional duty to use the degree of care, skill, and diligence commonly used by other members of their profession under similar circumstances, or according to the existent standard of care. If they fail to demonstrate the degree of professionalism expected, they can be held liable in a court of law for any harm, damage or loss they cause to another person or business.
Many professionals are obliged to take out Professional Liability coverage, for example, accountants, lawyers, and physicians. Doctors and other medical professionals usually need a specific medical Malpractice Liability policy. Some clients may even insist that knowledge-based professionals have such coverage before they decide on hiring their services and signing a contract. However, Professional Indemnity should not be associated with physicians and lawyers only. Actions for Professional Indemnity may be pursued against people of such professions as accountants, attorneys, architects, insurance agents, engineers, surveyors, real estate brokers, termite inspectors, escrow agents, stockbrokers, designers, IT contractors, consultants, nurses, beauticians, dentists, ambulance services, pharmacists, veterinarians etc. This list can be continued.
Client expectations of quality and advice continue to grow, resulting not only in improvement of services to answer those expectations but also in the increasing number of claims for errors or breach of duty. Professional Indemnity Insurance covers business owners who sell their skills or knowledge in the event of a negligence claim as a result of services they have provided to a third party. It can be an incorrect piece of advice given to a client or an inappropriate course of action taken. Professional Liability Insurance is a specialty coverage, which is not provided under Homeowners Endorsements, In-home Business policies or Businessowners policies (BOPs). Business owners, who have General Liability Insurance without Professional Liability or Errors and Omissions Insurance coverage, put their business and personal assets at risk.
In order to protect themselves against financial losses from lawsuits filed by their customers, all professionals who run their own businesses should obtain Professional Liability Insurance as an addition to their Businessowners policy. Errors and Omissions Insurance offers protection from claims if your client holds you liable for errors, or the failure to provide services as stated under the contract. This insurance will cover the costs of compensation sought by a client as a result of negligence, as well as the legal costs up to your policy limits. Professional Insurance may cover a negligent act, or faulty service (error), unintential infringement of intellectual property rights, unintential libel or slander, loss of documents, dishonesty, and unintentional breach of confidence or failure to provide a service (omission). Professional Liability coverage normally excludes any protection for intentional or dishonest acts of the policyholder.
In cases when liability is limited to acts of negligence, Professional Liability Insurance is called "Errors and Omissions Liability" or "Malpractice Insurance." Nobody questions your professionalism, but as a true professional, you should know that it is impossible to be everywhere and personally be engaged in every job, either big or small. As a business owner, you are responsible for the work done by your employees and independent contractors you hire. Errors and Omissions coverage will insure not only your mistakes, but also the mistakes of your employees and specialists you hire to do the job. Strictly speaking, any professional who provides advice, expertise, recommendations or some professional service to clients would be wise to carry Professional Liability Insurance.
A professional may also be held liable for the breach of a contract with their client, for the tort of fraud and for intentional infliction of emotional distress. Violation of duty by a professional can result in a contract action, or a tort action, or both. When the professional fails to perform the services stated under the contract, a breach of contract arises. In case the professional fails to perform as expected, then either a contract or tort cause of action may arise. A tort action is likely to arise when the performance of the professional causes damage or personal injury.
Since possible consequences of professional acts or omissions of different professionals may vary greatly, the Professional Liability coverage needs of different professionals also differ. There are different policy forms to meet the demands of specific professional risks and various types of loss Professional Liability policies cover. Determining what kind of Liability coverage you need and where to purchase it at a reasonable cost can be quite a difficult task. It is important to learn about your exposure to Professional Liability by speaking to your employer or trade association. Find out how much premiums will cost.
Check with your insurance agent or your professional, trade association or your institute if you will be able to purchase Liability Insurance through the association. They can refer you to companies that insure members of your profession. Each institute tends to have a selected list of insurers that members are recommended to apply to. The institutes can use their buying power to negotiate special rates for members. It can be wise to trust your professional colleagues or people who own businesses similar to yours as an additional source of valid information about Professional Indemnity Insurance.
In case you are a self-employed professional or small business owner, consider purchasing Liability Insurance which will cover both your office and your professional activities. Trustees and directors should check whether they are already covered by director's and officer's Liability Insurance. This insurance protects directors and officers against suits for breach of duty, neglect, error, or omission. If not potected by director's and officer's Liability Insurance, it is recommended to purchase a separate Professional Liability Insurance policy.
When selecting a suitable Professional Indemnity policy, it is important not to get lost in the Liability Insurance market options. It is easy to make a wrong decision when you lack knowledge and information about what the markets are doing, what the underwriters are looking for and how to present your company in the best light. The cost of your insurance also depends on this information. Here you will need help of a broker and an insurer who understand your business well and have the area of expertise required.
Reaching a settlement before it gets to the court stage can be best for both sides. Arbitration can be a way out in these situations. Court cases are known to be extremely time consuming and expensive. In addition, a settlement will help avoid reputational damage to both yourself and your client.