888-900-0205What it Does NOT Cover
- Intentional wrongdoing or criminal acts
- Bodily injury or property damage (which would be covered by general liability insurance)
- Employment-related disputes
- False advertising
Professional liability insurance, also known as errors and omissions (E&O) insurance, is a type of coverage designed to protect professionals from claims made by clients for inadequate work or negligent actions. This insurance is particularly essential for individuals or businesses that provide services, advice, or expertise, as it covers legal costs and potential damages arising from lawsuits related to professional services.
Errors and Omissions
- Errors: Mistakes made during the delivery of professional services.
- Omissions: Failing to provide a service or leaving out important information that leads to client loss.
Claim Example: A financial consultant advises a client to invest in certain stocks. Due to an error in calculations, the client experiences significant financial losses. The client sues the consultant for the financial loss due to the poor advice. Professional liability insurance would cover the claim for the consultant’s error.
Negligence
- Failure to exercise the appropriate level of care or skill that a reasonably competent professional in the same field would have used, leading to client damages.
Claim Example: An architect designs a building with a structural flaw that does not meet safety standards. As a result, the building suffers damage, and the client sues the architect for negligence. The insurance would cover the costs of the lawsuit and any resulting damages.
Misrepresentation or Breach of Duty
- Misrepresenting your qualifications, services, or failing to meet the terms outlined in a contract or professional duty can result in claims. This coverage protects against allegations of not fulfilling promises.
Claim Example: A marketing consultant promises a company a 30% increase in sales with a new campaign but fails to deliver any substantial improvement. The company sues the consultant for breach of duty, claiming they misrepresented their capabilities. Professional liability insurance would help cover the legal defense and potential settlement.
Legal Defense Costs
- Even if a claim is baseless, the legal costs involved in defending the lawsuit (such as attorney fees, court costs, and investigation fees) are covered under professional liability insurance.
Claim Example: A software developer is accused of delivering a faulty product that allegedly caused significant financial loss to a client. Even though the developer believes they are not at fault, they still need to defend themselves in court. The legal defense costs, even if no damages are awarded, would be covered by their professional liability insurance.
Defamation or Libel
- In cases where a client accuses a professional of making defamatory statements that harm their reputation, this insurance can cover legal costs and damages.
Claim Example: A public relations consultant makes a statement about a competitor in a meeting with a client. The competitor claims the statement was defamatory and sues for damages. The consultant's professional liability insurance would cover the defense costs and any settlement related to the defamation claim.
Copyright Infringement
- If a professional inadvertently infringes on a client’s intellectual property rights, this insurance may cover legal claims and associated costs.
Claim Example: A graphic designer creates a logo for a company, unknowingly using a design that is similar to an existing trademarked logo. The original trademark holder sues for copyright infringement. Professional liability insurance would help cover the costs of the lawsuit and any damages awarded.
Breach of Confidentiality
- If a professional inadvertently discloses confidential client information, leading to damages or losses, this can be covered by the insurance.
Claim Example: A lawyer inadvertently discloses sensitive client information in an email sent to the wrong recipient. The client sues the lawyer for breaching confidentiality, claiming that the disclosure caused financial and reputational damage. The lawyer’s professional liability insurance would cover the legal defense and any compensation to the client.
Failure to Deliver Services
- If a service is not provided in the way it was promised, or not delivered at all, and the client experiences financial loss as a result, this insurance can cover the claim.
Claim Example: An IT consultant promises a client that a new software system will be fully operational by a certain date. Due to delays, the system isn’t implemented on time, and the client suffers significant financial losses because of the delay. The client sues the consultant for failing to deliver services as promised. Professional liability insurance would cover the legal fees and any settlement in this case.