In this series we look at specific insurance policies and concisely explain how they work.
Who does it protect?
- Professional Liability (PL) provides liability coverage to professionals for damages resulting from errors or omissions arising out of their services. Professionals can mean accountants, attorneys, doctors, architects, engineers, real estate brokers, insurance brokers, construction managers. consultants, among a variety of other professions.
What coverages does it offer?
- Where General Liability requires bodily injury or property damage to be triggered, Professional Liability does not. Professional Liability policies require a “wrongful act.” This can be defined as an error or omission in rendering or failure to render “professional services,” that results in third party damages (including financial damages).
Who could bring a claim?
- Your client, a third party, anyone who suffers damages as a result of your professional services can bring a claim. As referenced above, this can be economic damage. Bodily injury or property damage is not needed to trigger this policy
Why would they bring a claim?
- A claim would be filed if a third-party felt that your professional services were rendered in error, thus resulting in financial damage to the claimant.
When should you submit a claim?
- If you become aware of a circumstance which may give rise to a claim, you should notify the insurance carrier in that policy year. In the event of a claim, you should immediately report the claim to your insurance carrier in writing.
What are some claims examples?
- Accountant – Tax consultant fails to submit a required form. Client suffers damages in form of penalties and fees tied to the missing form. Policy paid to indemnify client
- Technology E&O – A software development company was hired to develop an application for a client. This application was supposed to track incoming and outgoing inventory among other business functions. After years of development the software went live and failed work as described. The policy provided defense cost for the insured and indemnified their client for damages sustained
- Architect – An architect failed to design a building up to the standard of care which lead to design errors and project overruns. The PL policy defended the architect and indemnified their client.
Any specifics to be aware of?
- There are specific Professional Liability policies for specific industries. An Architects & Engineers PL policy will be different than a Miscellaneous PL policy or a Construction Management PL policy. It is important to review the definition of Professional Services as this is the backbone of any PL policy. This definition needs to encompass the insureds scope of services.