Who needs professional liability insurance?

​You might, and you might not know it.

This is a question I seldom get, but I wish I heard it more. The “usual suspects” of those who should have this… doctors, lawyers, and insurance agents… they know that they need it. But others need it too.
 
What professional liability insurance is not.
Professional liability insurance is not regular liability insurance. It is not coverage for “slip and fall” incidents in your business. If you are a business owner, you already have coverage for that (I hope).
It’s also not coverage for employee injuries or employment disputes. You should have separate coverage for those things too.
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Finally, it’s not coverage for “loose lips” libel or slander. That’s covered under a general liability policy.
 
So, what is professional liability insurance?
The other names by which it is referred to help us understand what it is. In some industries, professional liability insurance is also called “Errors & Omissions Insurance.” That’s the term used when insurance agents, real estate agents, lawyers, consultants, and a few others purchase this type of coverage.

The term used for medical professionals is “Malpractice Insurance.”

Professional liability insurance covers a professional when they fail to practice a high standard of care for their clients that is reasonably expected because of their advanced training, education, and skills.

In simple English, when you accidentally mess up as a trained professional, and it harms your client… you need insurance to protect you from the lawsuit that may arise.
 
Sam the Software Sensei
Sam works from home as a freelance software developer. He’s been at this so many years, he’s like a guru on the mountaintop of computer nerds. His nickname is “Sensei.” Some call him Obi-wan.

Sam has never made an error that he didn’t catch before delivering a software program to a client.

He’s never thought about professional liability insurance.

Until last week. His two-month project was delivered, and it looked fine. But it wasn’t. The resulting system crashes and delays cost the client tens of thousands of dollars. When the error was tracked down, everyone realized that Sam had simply forgotten a few lines of code.

A rookie mistake.

Sam was shamed and sued.

Professional liability insurance was designed to cover Sam’s legal expenses and court judgments. Too bad Sam didn’t realize that even “senseis” can make a mistake.
 
Who needs professional liability insurance?
The list of professionals who need this coverage is long. I’ll name only a few:

• Doctors
• Lawyers
• Architects
• Engineers
• Accountants
• Insurance agents
• Real estate agents
• Software developers
• Management consultants
• Website & graphic designers

 
Covered
Some typical things covered by a professional liability policy are missed deadlines, negligence, misrepresentation, miscommunication, and mistaken advice. The policy is designed to help with legal expenses and damages if you are sued for any of these or similar mistakes.
 
Not Covered
Some things are just common sense, so don’t rely on insurance to cover you for these:

1. Criminal acts. You cannot hack into your client’s computer.
2. Intentional wrongdoing. You can’t “accidentally” miss a deadline because your client annoyed you.
3. False advertising. You cannot say that you went to Harvard, when you went to WSU.
4. Pre-existing conditions. There is much in the news about “pre-existing conditions.” Your medical insurance likely covers them. Your professional liability policy does not.

 
My advice
Get this before you need it. Talk to a local agent who is experienced in this type of coverage.
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Bruce Sackrison is an insurance property and casualty broker affiliated with Professional Insurance Associates helping clients with insurance needs for personal, commercial and business insurance. Bruce can be reached at 707-931-0186, bruces@sackifs.com