Who Needs Professional Liability Insurance?

Is it possible that your client’s work or service could result in another person or entity’s financial loss? If so, your client may need professional liability insurance.
Without professional liability insurance (sometimes called errors and omissions insurance), some of your clients may be terribly exposed in the event of a lawsuit. Professional liability insurance provides invaluable protection for a wide variety of occupations. It’s important for brokers to help their clients identify the need and understand the value of professional liability insurance, and secure appropriate coverage.

Who Needs Professional Liability Insurance?

Many types of professionals benefit from professional liability insurance. In fact, this insurance is suitable for any type of professional who provides services that may lead to financial harm in the event of negligence or oversight.

Some examples of professionals who should purchase E&O coverage include:

• Architects
• Engineers
• Designers
• Contractors
• Surveyors
• Accountants
• Financial Planners
• Consultants
• Charity and Pension Trustees
• Health and Safety Inspectors
• Real Estate Agents
• IT Professionals
• Advertising & Media Agencies

How Does Professional Liability Insurance Protect Professionals?

Professional liability insurance provides coverage for third-party claims involving financial loss stemming from professional services. Typically, a client will file a claim alleging that negligence, oversight, misrepresentation, inaccurate advice, or failure to maintain professional standards led to a financial loss. Professional liability insurance will cover the resulting defense costs as well as any settlements or awards, up to the policy limit.

General liability insurance does not cover this type of lawsuit – it provides coverage for third-party claims involving bodily injury, property damage, and personal and advertising injuries. Since many professionals have both professional and non-professional risks, they may need both professional and general liability insurance. Contractors are a perfect example – different types of contractor mistakes and oversights could result third-party damage, bodily injury or a client’s financial loss.
Medical malpractice insurance is a type of professional liability insurance. However, unlike other types of professional liability insurance (and due to the nature of medical services), medical malpractice insurance covers cases of bodily harm tied to professional services.

Examples of Professional Liability Insurance in Action

1). A surveyor is hired to measure the boundary of a property. The property owner uses the results when having a fence built. A neighbor objects to the fence, claiming it’s on his property, and hires a different surveyor. It turns out that the initial survey was incorrect, likely due to a malfunction in the equipment the surveyor used. Now, the property owner needs to take down and rebuild the fence, which will cost thousands of dollars. The property owner sues the surveyor.
2). An accountant prepares a tax filing for a wealthy individual. However, the accountant delays filing because he is waiting for clarification on a recent change in the tax code. Things become busy during tax season, leading the accountant to forget to follow up and file. The client misses the tax deadline and is penalized. As a result, the client sues the accountant.
3). A real estate agent is representing a buyer. The buyer makes an offer on a house that has a history of squatters, but the real estate agent doesn’t disclose this because she assumes the squatters have left. When the sale closes and the buyer takes possession, it becomes clear that the squatters have not left, and they now refuse to do so. The buyer files a lawsuit against the real estate agent for failing to disclose important information.

These are just a few scenarios that may result in lawsuits against professionals. Risks like these show how professional liability insurance provides important protection.

Key Points to Make When Discussing Professional Liability Insurance

Some professionals may be reluctant to buy professional liability insurance because they don’t think they need it. Brokers can help the professionals they serve by educating them. Some points that demonstrate the value of this type of product include:

• No one is perfect. Buying professional liability insurance is not an admission that you’re bad at your job. The reality is anyone may make an occasional mistake.
• Even baseless claims may be costly. Without insurance, professionals may feel like they have to settle to avoid lengthy and costly court battles, which may lead to reputational harm.
• Professional liability insurance protects professionals and their clients. If clients are harmed, coverage can make them whole again.

Do you need help accessing professional liability insurance that safeguards your clients? Costero Brokers can help. Learn more.

Costero Brokers has access to the Lloyd’s Market E&O lineslip which provides Professional Liability Insurance to hundreds of industry types / professional services. We can also tailor bespoke coverage to fit our clients needs. For more please email our specialist Jamie Webb at jwebb@costerobrokers.com