Professionals are expected to have the required knowledge and training to perform the services for which they are hired and they are expected to perform them to the standards of conduct for their profession. If they fail to use the particular skill as is expected by the client, they can be held responsible in a court of law for any harm they cause. Professional Liability covers the professional for negligence.
Errors & Omissions (E&O) insurance can cover the cost of defending your company in a civil lawsuit and certain damages awarded, even if the legal action turns out to be groundless. Professional liability insurance is required by law in some areas for certain kinds of professional practices, especially medical and legal, where it is more commonly called Malpractice Insurance. This type of protection is not part of your General Liability Insurance or Homeowners Insurance.
Coverage does not include criminal prosecution, and there is a wide range of potential liabilities under civil laws that may not be covered unless written explicitly into the professional liability insurance policy. Common claims that professional liability insurance covers are negligence, misrepresentation, violation of good faith and fair dealing, and inaccurate advice. Some policies could also cover privacy violations.
Many types of businesses need professional liability insurance. If your company business works directly with customers while providing services, you should consider professional liability insurance:
- Technology & Legal professionals can benefit from E&O insurance because when technology fails, the financial impact to their business can be significant. Traditional liability insurance policies are not designed to respond to these claims, so professional liability can be extremely beneficial for software and technology companies, as well as hardware and electronic manufacturing businesses.
- Real estate professionals may need protection against losses resulting from negligence or errors and omissions in the performance of their services.