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About Professional Liability and E&O

Preamble

This content is independent of any content coming from insurance brokers, insurers, law firms, or insurance lobbyists. Commercial insurance is rarely taught in schools, and when it is, it’s mostly done through the lens of brokers or insurers. There are many misconceptions around Professional Liability, like many other topics in commercial insurance, due to bad habits acquired through over reliance on insurance brokers or insurers or information providers who are lobbied by them. It is also important to note that insurance has both an operational aspect and a legal aspect, on which we put weights of 95% and 5% respectively in terms of importance to protecting a business and its investors (the point is that going to court to enforce coverage defeats the purpose of buying insurance, so you want to make sure that whatever insurance you buy protects your business right and pays out fast on large losses).

What Is Professional Liability

It is a form of Liability Risk whereby the risk originates from an action or inaction of an individual in their professional capacity and/or on behalf of an entity.

 

Overview Of Professional Liability Law and Insurance

The distinguishing factor between the professional and other trades is the emphasis on intellectual judgment and the expertise that characterizes their work. Various courts have established that a professional possesses a form of competence which is the result of acquired learning and aptitude developed by special training and experience. These special skills and knowledge result in potential liabilities when the professional fails to meet the standard of conduct mandated by their profession.

The duty or standard of care, as opposed to the standard of that of a "reasonable person", distinguishes a cause of action for professional negligence from one for ordinary negligence. Professional liability insurance policies define coverage in terms of financial loss. The Insured becomes legally obligated to pay certain sums as damages to a third party because of injury or loss arising out of an act or omission by the Insured in providing professional services (as defined under the policy). 

Typical policy specs:

- Duty of Insurer to defend.

- Claims-made basis.

- Restricted worldwide: the loss can happen anywhere in the world but the suit must be brought in the jurisdiction where the policy was issued.

When insurance is purchased to cover professional liability exposures, there is still a need to purchase a Commercial General Liability(CGL) policy to cover premises, operations and products and completed operations that fall outside the scope of professional services. Although the exposures covered under each of these policies are different, there are important coverage similarities and for this reason, it is advisable to coordinate between the CGL and the E&O (aka PI or PL) policy.

 

Professional Liability Law

Key Legal Doctrines used in Professional Liability: 

Ø Informed consent: omitted disclosures to the client. A professional can also be held liable for misrepresentations as to the nature or hazards of a course of action, whether such misrepresentations are negligent or fraudulent.

Ø The Respondent Superior Doctrine: this extends the professional’s standard of care to the supervision of lay people who may be assisting the professional in the provision of their services, which is also referred as vicarious liability.

Ø Privity: a contractual relationship must exist.

Ø Tarasoff/Thompson: this creates liability for negligent misrepresentation, if a professional fails to warn a third party that their client poses a danger to them.

Things to look out for:

- Professionals must be careful in their dealings with the public such that they do not inadvertently establish a professional-client relationship, which would be subject to the standard of care.

- The termination of a professional-client relationship can create potential liabilities on the part of the professional.

 

Insurance For Professional Liability

It is a standard form of commercial insurance. However, just like any other form of commercial insurance, professional liability insurance must be reworded before it is purchased from an insurance broker or company. The insurance must also be triggered clinically in the event of a loss independently of any broker or insurer. Rewording and triggering the insurance must be done by risk experts who are independent of brokers and insurers.

 

Professional Liability Definition In Insurance

There is no standard explicit definition of professional liability in insurance. Typically, the insurance policy would have a definition for ‘Wrongful Act’, which is a term used to define the liability that is insured by the policy. Every policy is different and definitions of ‘Wrongful Act’ can differ significantly from one insurer to another. Such definitions can also be reworded subject to technical negotiations with brokers and insurers.

 

Professional Liability Insurance Quote

If you represent a business, our team can assist. Our team makes brokers compete against each other while rewording quotes received to provide you with the best protection for the best value. If you are looking for insurance as an individual, any local broker can assist you, and we can also refer you to one in your geography.

 

Professional Liability Claims

There are millions of professional liability claims around the world involving either individuals or entities or both. Most professional liability claims relate to customers suing or demanding compensation from the individual or entity providing a product or service to them. In essence, such a product or service could have been faulty leading to damages to such customers who then turn to litigation in order to recoup their damages.

 

Errors And Omissions Insurance

It is another term for Professional Liability Insurance, also known as Professional Indemnity Insurance. The abbreviations of such terms are E&O, PL, and PI respectively. In essence these are all terms describing the same type of commercial insurance. Some terms are more predominant in certain countries, yet the type of insurance being offered is the same.

 

Underwriting Professional Liability Insurance

The challenge in underwriting this coverage is as follows:

Diversity of Exposures.  Each class of business presents not only different levels of risk, but often entirely different exposures and claims potential.

Pricing with Limited/Nonexistent Loss Data. Professional liability policies, particularly in the non-traditional professions, must be written on the basis of limited or in many cases, nonexistent loss data.

Rapidly Changing Exposures. In some professions the exposure to professional liability claims are not yet clearly defined. For example, the law of copyright as it pertains to printed matter is well established, but it is not so well established as it relates to consultants who design web pages for the Internet.

Given the above, an  important component to the underwriting process is to recognize the unique  exposures and claims potential represented by each class of risk and how to tailor the policy to insure these risks.

Underwriting Considerations:

- Good risk management controls?

- High risk of loss addressed through the use of lower limits, higher deductibles, and exclusions.

- Insurance carried by outside contractors or 3rd party service providers.

- Definition of Professional Services to accurately reflect the scope of services offered by the Insured.

- Is the Insured potentially exposed to suits brought by Non-client claimants? (when working on behalf of a firm and not for a firm)

- Any other services provided by the Insured that would not be seen as “professional” in nature (ex. a printer that also sells printing machines). The revenues from these other services should be deducted from the revenue figure used to rate the E&O risk, as the E&O policy should not respond for anything outside of negligence in the provision of professional services (as defined under the policy).

- Hold Harmless agreement and how it reads (avoid taking on risks where the Insured assumes liability on behalf of their client).

- When underwriting an account with prior losses, it is important to try and ascertain whether the loss involved likely or actual negligence on the part of the Insured.  A claim where the Insured had nominal fault but incurred defence costs may be a more favourable risk to one that committed an actual error or omission, even if the paid loss was less for the actual error or omission. After a claim has taken place, it is important to know what steps the Insured has taken to prevent future losses.

In assessing any risk for Professional Liability insurance, there are five (5) main questions underwriters need to ask themselves as follows:

1. What does the Insured do?

2. What could go wrong if they make a mistake?

3. Who do they do it for? The type of client may impact frequency or severity of claims (The preferred risk has a diverse mix of clients, with no one client responsible for a significant portion of the Insured’s revenues).

4. What is the likelihood of a mistake or claim? (ex. frequency)

5. How big can a claim be? (ex. severity) 

Other important underwriting considerations:

- Profitability and Longevity of the Risk

- Professional Experience and Training

- Contract Review

- Prior Claims History

- Defining Professional Services

- Loss control program of the firm

- The following underwriting  information should be requested and reviewed in the risk analysis process:

* Signed and dated application form. Underwriters can quote off of a competitor’s application form, but if that form does not provide the underwriter with enough information to properly assess the risk, then the broker should be probed further to get a more complete picture of the risk.

* Resumes of principals and key employees of the firm.

* Review of the firm's website.

* Copy of standard contract the firm uses with their clients.

* Financial Statements. 

Popular Searches Online

E&O Queries

Franchisor E&O Insurance

It is a type of E&O insurance specifically designed to protect franchisors. This type of insurance is complex and requires the input of risk experts who are independent of brokers and insurers. It is important to ensure that the insurance is reworded prior to being purchased from a broker or insurer. This includes tailored coverage for lawsuits from franchisees as well as rescission claims. Our team can assist with the management or the analytics of Franchisor E&O Insurance, you can request a proposal in one simple step. 

Errors And Omissions Insurance Cost

There can be a wide range for cost depending on the type, location, and details of the business to be insured, but under no circumstances should a business pay premium over 5% of the insurance limit. Some small businesses and professionals could pay as little as $1000 for a $1 million insurance limit.

How Much Does E&O Insurance Cost

Please refer to the preceding query shown right above.

Errors And Omissions Insurance Real Estate

Depending on your operations within the real estate sector, the insurance must be reworded accordingly to be operationally relevant. For example, the insurance for a real estate contractor should be worded differently than that of a real estate investment trust.

Errors And Omissions Insurance Quote

Our team can assist if you represent a business. Our team makes brokers compete against each other while rewording quotes received to provide you with the best protection for the best value. If you are looking for insurance as an individual, any local broker can assist you, and we can also refer you to one in your geography.

What Does Errors And Omissions Insurance Cover

It covers the liability arising from the action or inaction of an individual and/or entity when providing a service in their professional capacities.

What Does E&O Insurance Cover

It covers the liability arising from the action or inaction of an individual and/or entity when providing a service in their professional capacities.

Errors And Omissions Insurance Definition

There is no standard explicit definition of errors and omissions in insurance. Typically, the insurance policy would have a definition for ‘Wrongful Act’, which is a term used to define the liability that is insured by the policy. Every policy is different and definitions of ‘Wrongful Act’ can differ significantly from one insurer to another. Such definitions can also be reworded subject to technical negotiations with brokers and insurers.

Where To Buy Errors And Omissions Insurance

Our team can assist if you represent a business. Our team makes brokers compete against each other while rewording quotes received to provide you with the best protection for the best value. If you are looking for insurance as an individual, any local broker can assist you, and we can also refer you to one in your geography.

Who Needs E&O Insurance

Any person or entity providing a service to customers in return for compensation depending on their professional liability risk exposure as well as contractual obligations.

Errors And Omissions Insurance Application

It is the application form that one must complete and submit as part of the information to be provided to the assigned broker or insurer. Note that it is important to review the application carefully before completing it as there may be legal questions that can negatively impact coverage once a policy is in force.

Errors And Omissions Insurance Coverage

Please refer to the section ‘Insurance For Professional Liability’.

E&O Insurance Coverage

Please refer to the section ‘Insurance For Professional Liability’.

Errors And Omissions Insurance Broker

There are many brokers that can distribute E&O insurance. Please be aware that the insurance must be reworded before it is purchased from a broker or else it will not be relevant operationally. This needs to be done by risk experts who are independent of any broker.

Get E&O Insurance

Our team can assist if you represent a business. Our team makes brokers compete against each other while rewording quotes received to provide you with the best protection for the best value. If you are looking for insurance as an individual, any local broker can assist you, and we can also refer you to one in your geography.

E&O Insurance Deductible

An E&O insurance deductible can be as low as $500 for individuals and $1,000 for entities. The deductible varies greatly depending on who is being insured.

Additional Insured On Errors And Omissions Insurance

Any individual or entity, separate from the main insureds, can be added as an additional insured under the policy subject to the review and agreement of the insurer.

Queries By Profession or Industry - CONTACT US

Professional Liability For Contractors

Contractors could face various types of monetary demands as well as customer suits depending on the nature of their work. The insurance should be reworded to take into account the operational details of a contractor’s scope of work.

Professional Liability Fund

Investment funds are subject to investor monetary demands and lawsuits forming the main source of professional liability risk. Most funds are required, either by large investors or regulators or other bodies, to buy professional liability insurance. What the majority of investment professionals do not realize is that such insurance can be an indirect hedge to investment risk. It is therefore of utmost importance to have the PL, PI, E&O fund insurance be reworded to take into account the strategy and operational metrics of the insured fund. In addition, it is equally important to clinically trigger the insurance in the event of an operational loss or investment loss for most effective results.

Professional Liability For Engineers

Engineers could be held liable as a result of the service they offer. The insurance that they would buy has to be reworded to take into account the specific operational details of the engineering services provided.

Professional Liability For Accountants

Accountants can also make errors and omissions and be subject to client or regulatory lawsuits as a result. Think about the many accounting scandals that have occurred and the likelihood of lawsuits that can haunt a specific accountancy for an error made by an accountant. The Wirecard scandal is one example.

Examples of claims:

- The accountant misses several journal entries causing their client a financial loss;  

- The accountant misinterprets the Income Tax Act and files improper returns on behalf of their client resulting in a significant financial loss to the client after they are audited and reassessed.

Underwriting Considerations:

- What kind of services does the Insured provide? Some accountants offer services that go beyond the typical scope of an accountant. This can involve providing advice on mergers or acquisitions, performing business valuations, and helping their clients manage their investments and with estate planning.

- How often is a contract used with the Insured’s customers and what type of contract is used? It is preferable that contracts be used 100% of the time. 

- What is the accountant’s education and experience? The ideal Insured will be either a CA, CGA, CMA, or equivalent, and have had at least two (2) years of prior accounting experience.

- If tax return preparation is offered, then what percentage of returns are corporate versus personal?

- What professional associations does the accountant belong to? 

Professional Liability For Nurses

Nurses can be held liable for issues including medical malpractice, which is a form of professional liability risk. There is specific insurance for medical malpractice that needs to be reworded to account for the operational details of the nursing staff. 

Professional Liability For Consultants

Even consultants can make mistakes and provide the wrong advice, and if such advice leads to a loss to a customer then the likelihood of a suit against such consultants increases substantially. With that said, the professional liability risk faced by consultants is on the lower end of the exposure spectrum than the risk faced by other professionals. Types of consultants include: Management Consultants; HR Consultants; Process Consultants; Product Development or Marketing Consultants; etc.

Examples of claims:

- Negligence: advice given by a consultant may be incorrect or insufficient resulting in economic damages suffered by the client.

- Misrepresentation: misunderstanding between the client and a consultant over what the client expected from the consultant in terms of a final work product. 

- Breach of Contract

- Failure by the consultant to start or timely complete all or part of the work project

Underwriting Considerations:

- Insurers need to understand exactly what services the consultant is providing. 

- What is the typical profile of the clients and the average revenue per client? (the more diversified clientele base the better)

- Are there any non-client third parties who may be impacted by the consultant’s services, for example, the consultant’s client’s customers?

- How is the consultant compensated (ex. flat fee or equity interest in clients)? Generally it is better if the consultant is compensated on a fee basis to help prevent any conflict of interest issues.

- Does the consultant have discretionary authority to act on behalf of the client or implement actions without the client approving first?

- What are the consultant’s processes and procedures for collecting delinquent fees from clients? Suits for fees brought by consultants against their clients commonly lead to counterclaims against them for errors and omissions allegedly committed in the work provided.

- Do the consultants have the appropriate experience in the area they are consulting in?

- Does the consultant always use a written contract with their clients?  If not, then why not? 

- Does the consultant have any bodily injury or property damage (BI/PD) exposures or any other exposures that should be excluded or otherwise limited?

- How to define “Professional Services”? It is recommended that insurers be as specific as possible, without narrowing coverage so they are still insuring the bulk of what the consultant does. 

Professional Liability For Interior Designers

Interior designers can be subject to lawsuits by their customers, just like any other professionals providing a service, however such professional liability risk is on the lower end of the exposure spectrum when compared to other professionals. The insurance must be reworded to take into account the most pressing issues for the insured designer.

Professional Liability For Property Managers

The professional liability risk faced by property managers ranges depending on their scope of work (ex. a property manager of a single condo building will have a very different exposure than a property manager servicing real estate investment trusts). The fine print of the insurance must take into account the operational details of the property manager.

Professional Liability Of Architects

The professional liability risk faced by architects is one characterized by low frequency and high severity. For example, architects of infrastructure projects can face debilitating lawsuits in case of physical damage to such projects that is not caused by natural perils while causing bodily injury to third parties. The insurance must be reworded to include the architect’s operational details. 

Professional Liability Beauty Salon

The professional liability risk faced by a beauty salon is one characterized by low frequency and high severity. For instance, a customer may sue the salon for not liking their appearance or for a medical condition that originated as a result of the service provided by the salon. The insurance must be reworded to include the salon’s operational details.

Professional Liability Real Estate

Real Estate can include development or the management of real estate investment trusts or brokerage or other functions. Each function will have its own measure of professional liability risk, which has to be reflected within the insurance wording or else the insurance will not be operationally relevant and will have a low payout ratio.

Professional Liability Technology

Technology can include many different sub-industries and the professional liability risk originating from the use of technology is one that faces various sectors. The PL, PI, E&O insurance must be reworded depending on the type and measure of technology risk that would in turn result in liability risk.

Professional Liability Adjusters

Public adjusters have the greatest exposure (employed by the policyholder), as opposed to staff adjusters and independents.

Examples of claims:

- Overpayments, underpayments or late payments of claims by Insurers.

- Payments to ineligibles (ex. payment to a beneficiary who has already exhausted their yearly maximum benefit from a health insurance plan).

- Payments constituting unfair or unjust enrichment (ex. overpayment by virtue of a failure to apply a coinsurance clause under a property insurance policy).

- Improper refusal of benefits (ex. coverage under a professional liability policy is denied based on an incorrect interpretation of a policy exclusion).

- Failure to follow payment guidelines or procedures (ex. an adjuster’s level of settlement authority for a specific client is $5,000 per claim, but the adjuster settles a claim  for $8,500 without consulting the client).

Underwriting Considerations:  

- Analyze the breakdown of the kinds of claims adjustments performed (ex. Aviation vs. standard property).

- Firms deriving a higher percentage of their revenues from consulting and claims auditing tend to have lower exposures to loss than a firm that does none of this work.

- The experience of the claims adjuster and his supervisor in a firm should be analyzed to ensure that they have the level of experience necessary to adjust the type of claims they are working on.

- The loss history over the past five (5) years should not indicate a problem with either claims severity or frequency.

- A review of a firm’s internal controls is critical (ex. limits on authority, oversight requirements, internal audit practices, ongoing training/education, computer issuing cheques, strict protocols for getting the client’s written approval before any payments are made above a certain dollar amount, a quick turnaround time between when a claim is received and when it is closed, a reasonable number of files being handled by each adjuster each week in light of industry norms and given the type of claim being handled, a low percentage of claims denials being appealed by policyholders, no involvement with structured settlements).

Queries By Country or State - CONTACT US

Professional Liability Insurance New York

New York is considered a highly litigious jurisdiction relative to many jurisdictions around the world. It is even more important for businesses based out of New York to ensure their insurance is reworded by experts independent of brokers and insurers and triggered clinically in the event of a loss. Our team can assist mid to large sized businesses in New York.

Professional Liability In Australia

Australia has a developed insurance market as well as legal system. PI, PL, E&O insurance is widely available in Australia however must be reworded and triggered by experts independent of brokers and insurers. Our team can assist mid to large sized businesses in Australia.

Professional Liability Insurance Netherlands

The PI, PL, E&O insurance marketplace is developed in the Netherlands, however lags behind North America. Our team can assist mid to large sized businesses in the Netherlands.

Professional Liability Insurance Germany

The PI, PL, E&O insurance marketplace is developed in Germany, however lags behind North America. Our team can assist mid to large sized businesses in Germany.

Professional Liability Insurance Quotes Canada

As a Toronto based company, we know the PI, PL, E&O insurance marketplace in Canada inside out. Our team can assist small to large sized businesses in any province in Canada.

Professional Liability Insurance Quebec

Quebec is one of the main Canadian provinces in which we service businesses including assisting them with the procurement of PI, PL, E&O insurance. Our team can assist small to large sized businesses in Quebec.

Professional Liability Insurance Georgia

Our team can assist mid to large sized businesses in Georgia, both the country and the US state. Note that the measures of professional liability risk vary greatly between both.

Professional Liability Insurance Japan

The PI, PL, E&O insurance marketplace is developed in Japan, however lags behind North America. Our team can assist mid to large sized businesses in Japan.

Professional Liability Insurance Quotes UK

Our team can assist mid to large sized businesses in the UK as it respects the procurement and management of PI, PL, E&O insurance.

Professional Liability Insurance Greece

Our team can assist mid to large sized businesses in Greece as it respects the procurement and management of PI, PL, E&O insurance.

Professional Liability Insurance UAE

The UAE is considered an oil rich nation, however lags behind many of the developed countries when it comes to commercial insurance, especially specialty products such as PI, PL, E&O insurance. The professional liability risk is considered to be lower than most developed countries due to the dynamics of the legal system. Our team can assist mid to large sized businesses in the UAE as it respects the procurement and management of PI, PL, E&O insurance.

Professional Liability Insurance Hong Kong

Our team can assist mid to large sized businesses in Hong Kong as it respects the procurement and management of PI, PL, E&O insurance.

Cost Queries

Cost For Professional Liability Insurance

As a rule of thumb to start, we recommend businesses to budget an overall cost of 2.5% of the limit of insurance. This is a conservative budgeting method and a fast way to start without getting into any details. Of course, cost varies greatly depending on the type of business, its size and scope, its locations, and most importantly its operational data and performance. 

Professional Liability Insurance 1 Million Cost

Cost can be as much as $25,000 for $1 million in coverage for some mid-sized businesses. However, this is on the higher end. Some small businesses and freelancing professionals can pay as little as $1,000 for $1 million in insurance limits. In bad or worst case scenarios, businesses could pay $250,000 per $1 million in insurance limits, however that is typically rare and would apply to businesses with high risks and/or bad claims histories. Again, the cost paid depends on the type and details of the business to be insured.

Comparisons To Other Insurance

Professional Liability Versus General Liability

These are two different operational types of liability risk. As a result, their corresponding insurance products are also different. Professional liability insurance is a very different product than General Liability Insurance. In fact, most general liability insurance policies will have an exclusion on professional liability claims.

Professional Liability vs Malpractice Insurance

Malpractice, which is mostly used within the medical field, however could be used in other fields as well, is a form of professional liability risk. However, the Malpractice insurance policy or product is separate and distinct from the traditional Professional Liability (PL, PI, E&O) insurance policy or product.

Professional Liability And Malpractice Insurance

Please refer to the query right above.

Professional Liability vs Directors And Officers

Professional liability insurance is a very different product than Directors and Officers (D&O) Insurance. In fact, most D&O insurance policies will have an exclusion on professional liability claims. Think about D&O insurance as the main protection against shareholder suits in the event of mismanagement of a company’s operations by its directors and officers. While PL, PI, E&O insurance is the main protection against customer suits as a result of a service that was provided to such customer.

Professional Liability vs Professional Indemnity

They are the same. Some terminology is more prevalent in some countries than others, that’s all. PL, PI, and E&O insurance are all synonymous.

Marketplace Queries

Professional Liability Brokers & Consultants Inc

There are hundreds of thousands if not millions of insurance brokers who can distribute professional liability insurance, ranging from global brokerages such as Marsh, Aon, Willis, Gallagher, to regional and local brokerages. Many of these brokers call themselves independent consultants yet that is a misrepresentation because brokers are compensated by insurers directly or indirectly and therefore it is impossible for them to be truly independent. Businesses should seek the advice of independent consultants, often known as risk management consultants, who cannot be compensated by insurers by virtue of their licensing. In fact, if an independent consultant is not involved in the rewording of the insurance, it is highly likely that the insurance will have a low payout ratio, not be operationally relevant, and be more costly than it should be otherwise. Most risk management consultants are local, our company is international and we can services businesses anywhere in the world.

Professional Liability Insurance Broker

Please refer to the query right above. If you are a business looking to procure PL, PI, E&O insurance, it is important you search for risk management consultants who can assist you with such procurement and management process independently of brokers and insurers.

Professional Liability Insurance Companies

There are many insurers who offer PL, PI, E&O insurance coverage ranging from global names such as AIG, Chubb, Travelers, Zurich, Lloyds, etc., to local and regional names. Every insurance company has its own appetite for the type of professional liability risk they want to insure, so it is important for a business to ensure their risk is being presented to the right insurer for most favourable terms.

Professional Liability Specialists

Our team specializes in professional liability risk and the insurance around it. Most importantly, we are independent of any broker or insurer, are not compensated by commission, and have our skin in the game along with the business being insured. There are also other risk advisors or risk management consultants who are specialists in professional liability. Beware of specialists working at insurance brokerages or companies as they would be biased, steering a business into insurance that benefits the insurer and not the business.

Professional Liability Agents Network

There are many agents who sell insurance on behalf of specific insurance companies. We do not recommend any business to buy PI, PL, E&O insurance directly from them without the coverage being reworded by independent risk management consultants.

Professional Liability TPA

There are few TPAs who focus solely on professional liability. Most of the time, insurers hire third party adjusters (TPAs) who are experienced in property and general liability claims to also handle specialty insurance claims including professional liability claims. Our team specializes in professional liability risk and the insurance around it.

Risk Management Queries

Professional Liability Risk

It is an operational type of Liability Risk and which is caused by an individual’s actions or inactions when providing a service in their professional capacity as such.

Professional Liability Protection

Protection against professional liability risk mainly consists of professional liability insurance (PL), also known as professional indemnity insurance (PI) or errors and omissions insurance (E&O). There are things that businesses can also work on to lower their professional liability risk such as strengthening HR practices, as well as improving internal processes and corporate governance.

Professional Liability Examples

Examples include but are not limited to the following:

  • An investor sues a fund manager claiming a lack of due diligence as a result of the manager underperforming their benchmark consistently;
  • A patient sues a Doctor for a procedure that went wrong;
  • A franchisee sues a franchisor for misrepresentations made;
  • Examples of customers suing an entity, including its directors, officers, and other individuals, that provided a service to such customer in return for compensation, whether or not such entity is at fault.

Professional Liability Risk Management

The practice of managing professional liability risk, which includes assessments, recommendations on controls, and hedging solutions such as commercial insurance.

Professional Liability Program

Typically done for associations with a large number of members or participants who are required to hold professional liability insurance. For example, an accounting association builds an insurance program whereby its members will have access to the insurance through them at preferential rates and coverage. Our team is experienced in building such programs.

Professional Liability Exposure

This is one of the hardest exposures to measure in risk management simply because the risk of human error is very hard to mathematically model. That said, there are guidelines around measuring the maximum probable loss of a business for professional liability risk. Some of these guidelines are brought forth by regulators (ex. European Banking Act measurement guidelines).  

Professional Liability Risk Advisors

We are a team of risk advisors independent of any broker or insurer specializing in measuring and hedging professional liability risk, which includes rewording and triggering professional liability insurance at the most cost-effective levels.

Professional Liability Solutions

Product solutions would be professional liability insurance (PL), also known as professional indemnity insurance (PI), or, errors and omissions insurance (E&O). There are ways other than insurance to lower the professional liability risk of a business, however commercial insurance is the best way to hedge such a risk.

Loss control techniques for Businesses 

- Standard forms should be developed describing the nature of the professionals' intended services in plain, unambiguous language.

- Necessity to maintain written records of important verbal instructions and oral agreements.

- Professionals should not provide any statements, either verbally or in writing, that could be construed as warranties concerning their work, nor should they guarantee a specific outcome or result with respect to their proposed services.

- Insert provisions in contracts requiring both parties to seek resolution of disputes by mediation prior to filing a lawsuit.

- Care should be taken by professionals when deciding whom to work for. The personal character, professional experience, reputation, and financial strength of the client are critical.

- Preserve the confidential nature of the client-professional relationship.

- Not be subject to a relationship that presents a conflict of interest.

Policy Specific Queries

Professional Liability Insurance Exclusions

Professional liability insurance would not cover certain risks as follows:

  • Fraud risk
  • D&O risk
  • Risk of bodily injury or property damage
  • Pension plan risk
  • Any other risk that can be insured by a separate insurance policy

In addition, professional liability insurance does not cover certain events as follows:

  • Claims as a result of events that occur prior to a retroactive date of the policy
  • Other events that are specifically outlined within the policy wording

Insurers can also add the following exclusions amongst others: investment decisions exclusion, warranties/guarantees exclusion, specified services exclusion, patent/trademark/copyright exclusion, audit exclusion, medical malpractice exclusion, fees exclusion, territorial exclusion, computer consultants exclusion, placement services exclusion, failure to maintain insurance exclusion. Note that every professional liability insurance policy is worded differently and a business should have the policy reworded including the wording around exclusions.

Adding Additional Insured To Professional Liability

In most instances you can add an insured, either related or unrelated to your organization, onto your PI, PL, E&O policy at no additional premium depending on the reason as to why the new insured is added. Note the difference between an ‘additional insured’ and an ‘additional named insured’. The latter has first rights to the policy just like the primary named insured whereas the former would have secondary rights to the policy (ie. they will be covered if named onto a claim whereby the policy is triggered and pays out, however they may not have the ability to make amendments to the policy or negotiate terms directly with the broker).

Professional Liability Duty To Defend

The policy can be subject to two main options for the payment of defence costs:

1. Duty of the Insured to Defend (it is the insured entity and individuals that pay for defence costs including lawyer fees upon a claim, and then remit the bills for reimbursement by the insurer); or

2. Duty of the Insurer to Defend (it is the insurance company that automatically takes care of the legal bills on behalf of the insured entity and individuals).

There are pros and cons to each option depending on the size, sophistication, and nature of operation of the insured entity and individuals.

Professional Liability Wrongful Act

Wrongful Act is one of the most important definitions within the professional liability insurance policy because it essentially sets explicit coverage parameters under the policy as it relates to the operation of the insured (it defines what acts are insured). It is important to reword the definition of Wrongful Act in order to match the operational data of the insured. This has to be done by risk experts independent of brokers and insurers.

Professional Liability Retroactive Date

This is the date that defines which claims will be covered based on the occurrence of events leading to such claims. Any event that occurs prior to the retroactive date shown on the policy will not be covered.

Professional Liability Deductible

Just like with any type of commercial insurance, the deductible is the amount that is borne by the insured. It is usually deducted from the amount paid out to the insured upon a claim. The deductible(s) of professional liability insurance policies will vary greatly depending on the size, nature of operations, and claims data of the insured, amongst other factors.

Professional Liability Definition

It is an operational type of Liability Risk that is a result of one’s actions or inactions tied to their profession and/or the provision of services.

Professional Liability Declaration Sheet

Mainly known as a Declarations Page, it is a broad outline and confirmation of coverage. It would outline items such as the primary named insured, type of insurance policy coverage, effective and expiry dates of the policy, retroactive date, deductibles, insuring agreements, list of endorsements, amongst other items.

Professional Liability Certificate

A Certificate of Insurance can be issued for a professional liability insurance policy.

Professional Liability Policies Vary In

The policies can vary greatly from one insurer to another. Moreover, when experts are involved in rewording the policies independently of brokers and insurers, the policies can vary much more in terms of the coverage offered through insuring agreements and definitions, coverage excluded, and other terms and conditions of the policy.

Professional Liability Tail Coverage

Professional liability insurance is itself protection for tail risks as it relates to professional liability risk (risks with low levels of probabilities of occurrence yet that can have a large financial impact). That said, the insurance can be reworded to protect the insured for risks that happen a lot more frequently than tail risks. It is therefore important for the policy to be reworded by experts independent of brokers and insurers.

Professional Liability Defense

Professional liability insurance will provide coverage for defence costs in the event of a claim against the insured, which could be in the form of a monetary demand or lawsuit amongst other forms. This is important because an organization including its individuals can be sued frivolously and/or without being at fault, which leads to defence costs being incurred. In fact, defence costs constitute most of the payouts of insurers under professional liability insurance.

Professional Liability Claims Made

Professional liability insurance is a ‘claims made’ policy. This means that the policy would pay for a claim that is brought forth within the policy period, for which valid insurance is in place, regardless of the timing of the occurrence of the event that lead to such a claim. This is different than policies that are on an ‘occurrence basis’ whereby the policy would pay for a claim if the event leading to such a claim occurs within the policy period for which valid insurance is in place.

Professional Liability Policy Definition

In most professional liability insurance policies the term ‘professional liability’ is not a defined term. The term can be used as the title of the policy but it is typically not a defined term. Instead, the term ‘Wrongful Act’ is defined and is what sets important explicit coverage parameters under the policy. You can refer to the section above named ‘Professional Liability Wrongful Act’.

Umbrella Policy For Professional Liability

While it is possible to have an umbrella policy to include professional liability insurance coverage that is bought on a primary basis, most often an excess policy is what is used to increase the limits of professional liability insurance. The excess policy can be written by a different insurer that provides additional limits on top of the primary limits bought through the main policy.

Professional Liability Endorsement

Just like with other forms of commercial insurance, an endorsement would amend the wording of the policy and it is used as such for PI, PL, E&O insurance. Any rewording and amendments made to the wording of the professional liability insurance policy would be done by an endorsement that legally implements such changes. A complete policy includes all endorsements.

General & Other Queries

Professional Liability E&O Insurance

Insurance for professional liability or E&O is the same product. These are just two different interchangeable terms. Another interchangeable term used is Professional Indemnity. Please refer to the sections above for more details.

Professional Liability Or Errors And Omissions Insurance

It is the same type of commercial insurance but has various names. Please refer to the sections above for more details.

Professional Liability Company

There are many insurance companies offering professional liability insurance including but not limited to AIG, CHUBB, Travelers, Zurich, Allianz, etc. It is always important to remember that a business has to reword the insurance with the help of independent risk experts before buying it from a broker or insurer.

Professional Liability Meaning

It is the operational type of Liability Risk that stems from an action or inaction tied to someone’s profession and that involves providing a service to a customer for a fee. 

Professional Liability Insurance Quote Online

Our team can provide you with a proposal based on your needs. Simply fill out and submit a proposal request form (it's a quick and easy 1 step process).

Professional Liability Insurance Quotes Small Business

Please refer to the section right above so that our team can provide you with a proposal.

Professional Liability Is Also Known As

Errors and Omissions, as well as Professional Indemnity.

Best Insurance For Professional Liability

The best insurance is one that is reworded and triggered by experts independently from a broker or insurer. Remember the professional liability insurance policy, just like any other form of commercial insurance, includes fine print that most businesses do not read simply because it is time consuming and requires certain expertise. This fine print must be amended so that the insurance fits the operations of the business buying it, or else the insurance payout ratio will be very low, the insurance will not be operationally relevant, and it will be costly.

Professional Liability Online

If you are looking for a quote or proposal for professional liability insurance, you have come to the right place. Our team can provide you with a proposal based on your needs. Simply fill out and submit a proposal request form (it's a quick and easy 1 step process).

Frequently Asked Questions (FAQ)

Is Professional Liability The Same As E&O?

YES.

What Is Professional Liability Coverage?

It is insurance against professional liability risk, which is an operational type of Liability Risk that stems from an action or inaction tied to someone’s profession and that involves providing a service to a customer for a fee.

Is Professional Liability The Same As Errors And Omissions?

YES. 

When Is Professional Liability Insurance Required?

It is required in various instances depending on the professional or business nature involved. For example:

  • Mortgage brokerages in Canada are required by provincial regulators to buy professional liability (PL) insurance;
  • Investment offices, in several jurisdictions ranging from Jersey to Saudi Arabia, are required to buy professional liability insurance by the corresponding financial     regulator;
  • Large clients may require their suppliers to carry PL insurance;
  • Other forms of requirements to purchase PL insurance, whether commercially contractual or regulatory driven.

Is Professional Liability The Same As General Liability?

NO. They are two different operational types of Liability Risk, as such the insurance acting as protection against each is different (PI/PL/E&O vs. CGL). Professional liability stems from a specific profession or service offered for a fee. General liability is more general in nature and can be common to any business (ex. bodily injury including but not limited to slips and falls, advertising injury, and other forms of liability risk that can apply to various businesses in various industries solely by nature of them being in business). 

Coordinating the CGL Policy and the E&O Policy.  A potential coverage gap can arise because most CGL policies written for miscellaneous professionals are endorsed to exclude coverage for bodily injury, property damage, personal injury and advertising injury when claims arise from professional services. Some CGL policies have this exclusion built into their forms, while others accomplish this by endorsing the policy to exclude such matters. Since virtually all Miscellaneous E&O policies also exclude bodily injury, property damage, personal injury and advertising injury by means of standard exclusions, Insureds that have meaningful exposures in these areas are left with no coverage.

For example, private investigators or security firms have particular exposures in these areas. In this case, the miscellaneous E&O policy would have to be modified so an exception is made to the bodily injury and personal injury exclusions in order to afford coverage for these types of claims, so long as the claims are the result of the Insured’s negligence in rendering or failing to render their professional services. In some cases, the potential exposure to bodily injury, property damage and personal injury may be so significant that the insurer will not be comfortable making the above exception, unless the CGL policy is also placed with the same insurer (ex. safety inspectors).    

How Much Is A 2 Million Dollar Liability Insurance Policy?

It could range from $2,000-$500,000 depending on the business type, scope and size, financial and operational details, and geography of operations. 

When Is Professional Liability Insurance Needed?

It is needed whenever you are contractually obligated or required by regulators to purchase the insurance, or if your exposure to professional liability risk is large enough to have an adverse impact on you and/or your business.

How Does Professional Liability Insurance Work?

It pays out, if triggered correctly, on a financial loss that is caused by a professional liability incident (ex. a customer suing). The fine print of the insurance must be reworded, and the policy must be triggered clinically, by risk experts independent of brokers and insurers.

How Much Does Professional Liability Cost?

The minimum cost for a freelancer would be around $1,000 for $1 million in protection amounts. Some businesses can pay as much as $250,000 for $1 million in protection amounts. The range varies greatly depending on the business type, size, scope, financial and operational details, as well as location.

Who Needs Professional Liability Insurance?

Anyone or any business that is required to purchase the insurance through contractual obligations or regulatory requirements, or that provides a service to clients for a fee exposing it to a sizeable amount of professional liability risk.

What Is Covered Under Professional Liability Insurance?

Acts such as errors, omissions, negligence, etc., committed by individuals or entities within their servicing of clients for a fee. Coverage also depends on how the insurance policy is worded. In general, the insurance would cover losses stemming from a Wrongful Act, which is a defined term under the insurance policy. However, the insurance must be reworded, by risk experts independent of brokers or insurers, so that it covers what is relevant to the buyer at the most cost-effective level, all while having a high insurance payout ratio.

Does Professional Liability Insurance Cover Legal Fees?

YES.

How To Get Professional Liability Insurance?

You can contact us, we are independent of any broker or insurer. We would analyze your details and have insurance brokers compete for your business so that you can get the most cost effective premiums, all while rewording the insurance so that it is more relevant to your operations.

Is Professional Liability The Same As Workers Comp?

NO.

How Much Professional Liability Do I Need?

That depends on what is required by your business relationships and regulators, as well as the measure of your professional liability risk. First, we would need to measure your exposure and then figure out the amount of insurance that is sufficient for you to carry.

What Is Professional Liability Exclusion? 

It indicates what is explicitly NOT covered under the policy.

Who Offers Professional Liability Insurance?

Various insurance brokers and insurers who are either local, regional, or international. It is however important to remember that the insurance must be reworded by independent risk experts before it is bought from a broker. The insurance must also be triggered clinically by such independent risk experts in order to maximize the insurance payout ratio.

Is Professional Liability The Same As Directors And Officers?

NO.

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