A Smart Choice for Lawyers
Also known as errors and omissions, professional liability insurance protects businesses from bearing the full cost of potential claims made against them while performing professional services. Professional liability insurance offers peace of mind by economically managing professional liability risk. Specifically, professional liability insurance will contribute to the payment of defense costs from frivolous lawsuits, disgruntled clients or charges of professional negligence. A professional liability policy can protect a small business from losing assets, paying high legal fees, and potential business failure.
Although similar to other insurance, professional liability insurance works a bit differently from other types of business insurance. Professional liability policies operate on a “claims made and reported,” basis. A claims made policy provides coverage when a claim is reported, regardless of when the claim actually occurred. Coverage is determined by the policy that is in force at the time the claim is reported, which may not be the same policy that was in force at the time the alleged error occurred.
Who Needs Professional Liability Insurance?
Anyone performing a professional service or giving a professional opinion should obtain professional liability insurance. Whether the professional service in question is consulting, providing legal services, or filing taxes returns, comprehensive professional liability manages risk by helping to offset potential monetary losses associated with errors or omissions that could occur while providing services to clients.
FOR BUSINESS PROFESSIONALS, GENERAL BUSINESS INSURANCE IS SIMPLY NOT ENOUGH.
Although general business liability coverage protects small businesses from a large variety of claims, such as property damage or personal injury, it does not cover professional negligence. If a client feels that the standard of care has not been met, a professional liability policy will offset the potential monetary losses associated with a claim.
Benefits of Professional Liability Insurance
Aside from protecting small businesses from the unknown and providing peace of mind, professional liability insurance also provides several benefits to professional service providers. First, obtaining professional liability insurance demonstrate a high degree of professionalism to clients. Professional liability insurance demonstrates a firm’s confidence in their work and accountability for all of their actions.
Despite paying a premium every year to maintain a policy, professional liability insurance actually saves a small business money in the long run. Unfortunately, mistakes do happen. If a claim is made against you by a client, your professional liability insurance comes to the defense and protects against devastating legal bills. Without the proper coverage a firm could incur far greater financial losses than the relatively low cost of professional liability premium.
Additionally, insurance carriers typically provide resources for firms to effectively assess and manage professional liability risk. It is in the best interest of both the carrier and the insured to mitigate possible risks. Carriers will often educate their insureds on claim trends and provide best practices to circumvent those risks.
What Does Lawyers Professional Liability Insurance Cover
Professional liability policies pay on behalf of insureds damages and defense expenses that the insured becomes legally obligated to pay as a result of a claim made against an insured resulting from professional services provided.
Professional services typically include services performed for a client as a lawyer, including acting as a mediator, arbitrator, or notary. Additionally, pro bono services are typically included.
Some of the most common errors covered by a Lawyers Professional Liability policy are as follows:
- FAILURE TO FILE WITHIN THE STATUTE OF LIMITATIONS
- FAILURE TO KNOW THE LAW OR POLICY SURROUNDING A CASE
- POOR ADVICE GIVEN TO CLIENTS
- CONFLICTS OF INTEREST
- FAILURE TO FILE THE INSTRUCTIONS OF A CLIENT
What Isn’t Covered
While it is important to note what is covered by professional liability insurance, special attention must also be paid to the exclusion section of a policy. A professional liability policy will not provide coverage for claims arising from intentional, fraudulent, criminal or malicious acts or claims arising out of physical injury or property damage.
Additionally, in the event an insured had knowledge of a claim prior to the effective date of the policy, the claim will not be covered. It is important to report knowledge of any circumstance that could potentially become the basis of a claim before the current policy expires.