As a business owner, you prioritize delivering top-quality goods and services. However, you can’t control every aspect of daily operations, and there’s always the risk of mistakes. When those mistakes violate a contract or cause harm, you can face legal consequences. Professional liability insurance can safeguard your assets if a client files a lawsuit.
What Is Professional Liability Insurance?
This type of policy, also called errors and omissions insurance or E&O insurance, protects commercial enterprises against claims of misrepresentation, negligence, and other errors and omissions.
When clients engage a professional, they expect a certain standard for goods and services. If the professional fails to meet that standard, clients may seek compensation through the court system. The professional can then file a claim to cover the legal expenses.
Some businesses have a higher risk of litigation than others due to the long-lasting effects of their rendered goods or services. The following are examples of professionals who should always have professional liability insurance:
Healthcare workers
Accountants
Information technology professionals
Engineers and architects
Graphic and interior designers
What Are Common Mistakes Professionals Make?
Professional negligence is one of the most common mistakes that can lead to a liability claim. Legally speaking, professionals have a duty to their clients. When that duty goes unfulfilled, the client may incur harm.
For instance, financial advisors must put their clients’ best interests before their own. If financial advisors recommend an investment that doesn’t perform well but will give them a larger commission, that is arguably negligence. Other mistakes relate to legal contracts:
Breach of contract
Failure to obtain informed consent
Misrepresentation
Inadequate documentation
Finally, clients may sue if a company took a job while having a conflict of interest, failed to follow industry standards, committed investment and financial errors, violated regulations, or had a data breach that exposed client information.
What Does Professional Liability Insurance Cover?
When you have E&O insurance, your insurance company may cover the costs of a legal defense, including settlement and judgment payments. It’s important to note that these policies only cover the company as a legal entity, though clients can also sue directors and officers, depending on the case. As a result, businesses should consider getting comprehensive management liability insurance to protect leadership’s personal assets. Errors and omissions policies also list specific exclusions:
Criminal actions, such as fraud
Workplace harassment or wrongful termination allegations
Property damage or bodily injury
Lawsuits involving employment fall under employment practices liability insurance, which is a separate coverage businesses should hold. Property damage and injury fall under general liability, another essential policy. However, insurance generally doesn’t cover criminal acts, as these entail purposeful decisions, not accidents or lapses in judgment.
Why Should You Seek Professional Liability Insurance?
A lawsuit can be costly, even if you eventually win. To avoid financial strain on your company, you should maintain E&O insurance.
Fortunately, Securance can assist. Whether you have concerns about commercial liability or litigation affecting directors and officers, our experienced agents can help. To learn more about your professional liability insurance options, contact Securance today.
About Securance
From our home base in Texas, Securance serves the insurance needs of clients throughout the country and abroad. With 50-plus years as a trusted advisor to businesses, families, and individuals, we help clients safeguard their hard work and step confidently into the future, knowing they are well protected. Contact us today at (713) 977-6606.
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