Professional liability insurance, also known as Errors and Omissions (E&O) insurance, is a type of insurance that protects professionals from financial losses arising from claims of negligence, mistakes, or omissions in the services they provide.
Who Needs It?
Professions that commonly rely on professional liability insurance include:
- Doctors, surgeons, and other healthcare professionals
- Lawyers
- Accountants and financial professionals
- Architects and engineers
- Consultants
- Technology professionals (IT, software developers)
- Real estate agents
- …and many others providing professional advice or services
How It Works
- Allegation of error:Â A client (or patient) claims you made a mistake or provided inadequate services that caused them financial harm or other damages.
- Lawsuit potential:Â They might threaten to sue or initiate a formal lawsuit against you.
- Insurance steps in:Â You notify your professional liability insurer, who will:
- Investigate the claim
- Provide legal defense if the claim is deemed valid under your policy
- Pay damages up to your policy limit if you are found liable
What It Covers
- Defense Costs:Â Covers lawyer fees and court costs, even if the lawsuit is groundless.
- Judgments & Settlements:Â Pays damages you’re legally obligated to pay due to a covered error.
- Specifics vary:Â Coverage details depend on the profession and policy, but can include things like:
- Errors in advice or judgment
- Missed deadlines
- Failure to deliver promised results
- Negligence or omissions
Why It’s Important
- Protects your livelihood:Â Even minor mistakes can lead to costly lawsuits that could ruin your business or career. Professional liability insurance protects your financial assets.
- Client peace of mind:Â Clients often feel more secure knowing you’re insured, and it may be required to obtain certain contracts.
- Peace of mind for you:Â Lets you focus on your work without constant worry about potential lawsuits.