When operating a business that provides services to consumers, there is often an inherent risk of something going wrong. It’s possible for consumers to get food poisoning from a restaurant or to injure themselves while swimming in a public pool that isn’t properly constructed. No matter how well-trained a staff, the risk of consumer harm does not tend to disappear completely. That’s where liability insurance comes in. General liability insurance can protect businesses against acts that cause damage to people’s health or property.
However, when claims that deal with negligence, misrepresentation, or a violation of good faith arise that do not cause specific bodily harm, it often won’t be covered under a business’ general liability insurance. That’s where professional liability insurance (PLI) comes in.
Professional liability insurance, sometimes known as professional indemnity insurance (PII) or errors and omissions (E&O), protects businesses against claims of corporate negligence. Damages awarded to consumers in civil cases relating to corporate negligence can reach exorbitant heights. It’s often prudent for corporations to purchase professional liability insurance as a failsafe in the event of a costly liability suit.
“Errors and Omissions basically covers any sort of clerical mistakes that a professional might make that may cause someone to bring a law-suit against them,” says Chad Smith, a broker at a professional liability insurance agency.
Professional liability insurance policies are set up on a claim-made basis and therefore only provide indemnity to the covered party for claims that arise during that specific claims period. Claims which relate to incidences occurring before the claim period are often not honored. It’s important to check the semantics of coverage policies, as some policies cover errors or admissions that aren’t related to negligence, while other policies have a clause that errors and omissions have to relate to negligence.
For many small businesses, a single negligence claim can have a devastating impact. That’s why it’s so important to make sure to protect your business from errors and omissions and other liability claims.
According to Mike Lange from The Insurance House, “Nobody has enough money to cover their own assets against what’s going to happen. Even the biggest companies in the world have insurance to cover themselves.”
Professional liability insurance policies can be quite complicated. Litigators involved in professional liability insurance suits dealing with negligence, malpractice or issues of errors and omission, it can often be helpful to retain a professional liability insurance expert. The added depth of experience that an expert can bring to your legal team can make the difference between winning and losing a case.