Professional liability insurance or errors and omissions insurance
Nearly any business that delivers services that require some form of technical training is potentially open to the risk of lawsuits. Liabilities that arise from the provision of professional services are typically not covered under general liability insurance or business owner’s policies. This means that businesses like doctors’ offices, accounting firms, law offices and those dealing in the trades will almost always be well advised to get insurance that covers liabilities arising from the performance of services.
Although not all business owners are aware of it, virtually any business that performs a skilled service of any kind is potentially exposed to serious legal risks. However, the nature of these risks can vary dramatically from one industry to another. As a result, professional liability insurance, which is also known as errors and omissions insurance in some industries, is usually very specific to the business type in question.
For medical professionals, this insurance type is known as malpractice insurance. In the real estate industry, it goes by the name of errors and omissions insurance. In every case, professional liability insurance protects businesses from the potentially ruinous costs of lawsuits that may arise out of the honest mistakes that are an inevitable part of doing business. In some cases, professional liability insurance will also cover negligent acts.
Who needs professional liability insurance?
Every business that offers a professional service should, without question, carry professional liability insurance. Many business owners underappreciate the severity of the risks they and their companies are exposed to simply by way of doing business.
Where large transactions are at stake, such as in the real estate industry, simple clerical errors can lead to major losses. Professionals working in such fields who do not carry professional liability insurance can quickly find themselves wiped out by lawyers’ fees alone when merely trying to defend themselves against claims.
The medical profession is notorious for producing lawsuits, many of which are frivolous. However, in medicine as in all fields, business owners should understand that a lawsuit lacking all merit does not mean that the owner could not face bankruptcy in the course of defending themselves against the false claims. In all cases, professional liability insurance will cover the defense costs.
Perhaps more importantly, mistakes do happen and, given a high enough volume of business, are probably unavoidable. Many errors are effectively out of the control of the business owners or employees. For instance, a contractor may use materials that they had no idea were defective, which may later cause a structural failure. In this case, having no foreknowledge of the defect may not be enough to absolve the business of liability. And it will certainly not protect them from being sued and incurring crushing legal costs.
For new businesses, it’s important to buy professional liability insurance sooner than later
Professional liability insurance is usually offered on a claims-made basis. This means that it will only cover claims for services that were provided within the policies effective date range. Businesses are often surprised to learn that a newly arising claim is not covered under their professional liability policy because the triggering event took place before the policy went into effect.
The delay between a perceived fault in a service provided and a claim or lawsuit being initiated as a result can be measured in years. And because claims and lawsuits can imperil the very existence of a business being sued, it is strongly recommended that all new service-providing businesses carry professional liability insurance from the first day they open their doors.
Aside from professional liability insurance, Velox Insurance also offers other insurance products that many businesses cannot do without. These include business owner’s policies, builder’s risk insurance, general liability insurance and commercial auto insurance.