Professional Liability Insurance: What You Need to Know
What is Professional Liability Insurance?
Professional liability insurance (PLI) is a type of insurance often utilized by licensed professionals in a wide variety of fields to cover certain types of claims against their businesses that may come about as a result of the professional services they provide.
Also known as Professional Indemnity Insurance (PII) and Errors & Omissions coverage, this particular type of insurance typically covers classes of legal claims such as negligence and malpractice committed in the course of professional duties and conduct.
Who Needs Professional Liability Insurance?
While historically associated with fields like law and medicine, professional liability insurance has become widely adopted among an expansive range of professions, including therapists, consultants, personal trainers, software developers, and event photographers, just to name a few.
Certain industries use specific variations on the common terms of art – for example, PLI-type coverage in the world of real estate brokers is almost always referred to as Errors & Omissions, while Malpractice Insurance has been the standard terminology adopted by the health care community for the most part.
Regardless of the specific language typically applied in any given field, the core purpose for such coverage remains the same regardless of terminology – protecting professionals from certain liabilities they are exposed to through the practice of their given profession.
What Kinds of PLI Coverage Are Available?
Perhaps in part because professional liability insurance has been incorporated as standard operating procedure in so many industries, there currently exists a considerable amount of options on the insurance market with regard to the terms of coverage available.
Even within single industries, not all PLI plans are created equal, and what may appear to the untrained eye to be minor discrepancies in contractual language could in fact result in widely different scopes of coverage and risk allocation.
Some common pitfalls that have led to undesirable results for the insurance claimant include:
Scope of Coverage: What behavior and infractions will and won’t be covered? Policies may cover negligence but not gross negligence, for example, which is not always a simple distinction to make in the process of committing a negligent act. Further, some policies may only provide for monetary compensation while others will include legal representation and/or other services should they be required in response to a claim.
Are there any risks or events, whether within or beyond your control, that are specific to your company or industry that could significantly disrupt your normal course of business and would require substantial financial and/or other particular assistance in order to correct?
Timing of Coverage: Some policies will only cover potentially liable actions that occurred while the policy was active only if the policy remains currently active. Meaning, even if the policy was active during the liability-creating event, if that policy is no longer active at the time that legal action is commenced, then the liability will not be covered in accordance with the terms of the policy. On the other hand, some policies include what is known as a coverage ‘tail’ in order to extend coverage in just such an event, providing some continuing protection going forward in the event of delayed legal action.
Are there any risks specific to your industry that may lead to harms that are not immediately perceived by the injured party or that may otherwise by subject to delayed legal action in seeking to address those injuries?
Gaps in Coverage: Like any of these terms, how gaps in coverage are handled in the contract may vary from policy to policy, and the range of outcomes that can arise as a result is significant. Given that many standard policies will only cover liabilities that occur with legal action commenced while the policy is still active (and don’t include a coverage tail), it’s possible for a sufficiently late payment to create a gap in coverage that essentially erases all preexisting coverage prior to the coverage gap without the insured even necessarily realizing that it has happened. For these reasons, locating a professional liability broker or advisor to highlight the implications of such terms within the context of both your industry and individual needs is highly recommended.
Has your business previously been covered by some form of PLI, and are there any potential liabilities in the past that should be addressed retroactively in the policy coverage going forward?
Is PLI Coverage Right for Your Business?
But how do you know that PLI is right for you in the first place?
Are you a professional providing services to the public or other businesses? Is it possible that during the normal course of doing business that your clients or others may perceive that they’ve been subjected to some form of harm (whether physical, financial, reputational or otherwise) and that you may in some way be responsible? What about harm that may occur when the course of doing business is abnormal for reasons beyond your control?
If your answer to any or all of these questions is yes, then some form of professional liability insurance coverage is probably a wise decision for you.
Finding a Professional Liability Insurance Broker
Because of the complexities involved, it is generally advisable to contact a PLI broker or consultant in order to thoroughly examine the implications of various coverage options that will be available to you and your business. The prospect may be daunting at first to the uninitiated, but the security it can provide is well worth both the effort and the expense, especially in the fairly likely eventual event of liability exposure.
More importantly, by using a searchable database like Mployer Advisor, you will not only be able to browse brokers based on their location, areas of specialization, or underwriting affiliations, but also see reviews of each PLI broker’s previous work including reviews from past clients and an algorithm-based rating system.
On Mployer Advisor, you can quickly and easily find the professional liability broker that’s right for you and your business. To search for PLI brokers in your area and explore the services they can offer, click on the button below.
About Mployer Advisor
At Mployer Advisor, our focus is creating transparency in the insurance and insurance broker, consultant and advisor space to the advantage of the employer. Analytics is our core and we will bring to light new information, tools and resources to aid employers in making more cost-effective decisions. As a phase I, we are here to help employers find the right broker or consultant and the right insurance company for them. Giving choice and initial transparency is a first step in creating an employer centric insurance marketplace.