Professional Liability Insurance

Most professional service providers in Massachusetts ought to consider carrying a professional liability policy, for anyone could potentially make a costly mistake in their work. Some specific types of professionals who might need a policy from an insurer include:

• Medical practitioners, such as doctors, nurses and paramedics
• Construction professionals, such as architects, engineers, and designers
• Legal practitioners, such as attorneys and paralegals
• Real estate professionals, such as brokers and agents
• Insurance professionals, such as brokers and agents
• Financial professionals, such as accountants and investment advisors
• Marketing and advertising professionals
• IT professionals and programmers

In all of these examples, the business owner provides advice or services to clients who could potentially experience harm as a result. For instance, let’s say you’re an architect who recommends certain materials for constructing a new building. If the materials break down and the client has to pay to redo the building, the client might take legal action against you.

Even a lawsuit that doesn’t have merit can be very expensive to defend. Professional malpractice lawsuits are the most time-consuming kind and can cost a small business tens of thousands of dollars in legal fees. Having to pay for those costs out of pocket can sink your business into debt, or worse, even force it to close down.

No matter how careful you are, mistakes can happen if there are miscommunications or if employees don’t follow training. Professional liability coverage is the primary type of insurance to help you protect against lawsuits that claim service-related errors.

If your business is sued and you have professional liability insurance, the insurer will provide a lawyer to defend you against the lawsuit. They will also pay any damages that arise from the lawsuit. The coverage should apply whether or not you’re actually at fault, and extends to allegations brought against you, your business partners, or your employees.

Here are some examples of incidents that would be covered by a professional liability insurance policy:

• A doctor misdiagnoses a patient’s condition, causing them mental anguish and increased medical costs. The patient might sue the doctor for malpractice.
• An architect uses poor materials to construct a new building. The building collapses midway through construction and the client has to rebuild. The client company can sue the architect for negligence.
• An advertising agency or web development firm builds a faulty website for a client that goes down just before a product launch. The client sues the engineer for negligence and loss of income.
• A company’s marketing team inadvertently uses another company’s copyrighted images in social media marketing. The company that owns the images sues for copyright infringement.
• A company contracts with a supplier for raw materials, but the supplier fails to do a quality assurance check as specified by the contract. The client is unable to use the materials and suffers lost sales as a result. They can sue the supplier for breach of contract.

Although professional liability insurance covers a wide range of claims, there are some things that a policy won’t cover. The good news is that, when professional liability coverage doesn’t apply, there’s often an alternate small business insurance policy that will cover you.

Here’s what professional liability coverage usually does not cover:

• Bodily injuries: Clients who are injured as a result of products or services are usually covered by product liability insurance or general liability insurance. The exception is medical malpractice, where bodily injuries are covered. Employees who are injured on the job are covered by workers’ compensation.
• Property damage: Physical damage to a company’s property is covered by general liability or property insurance.
• Intentional wrongdoing: Intentional mistakes are not covered by professional liability policies. For example, imagine a business owner who intentionally turns in shoddy work for a client that they have a personal dispute with. The business won’t be protected by professional liability insurance.
• Illegal actions: Any criminally illegal acts by a business, such as violating securities laws or hacking into a competitor’s software, are not covered by professional liability insurance.
• False advertising: Professional liability coverage doesn’t cover false advertising claims.
• Employment discrimination: Claims of gender, race, or other forms of employment discrimination fall under employment practices liability insurance (EPLI).

Keep in mind that sometimes, different forms of insurance can come bundled together in one package. It is possible to combine professional liability insurance with other forms of coverage — like general liability insurance and commercial property insurance — in a business owners policy (BOP). The benefit of a business owners policy is convenience and affordability. Instead of having multiple insurance policies, potentially from different insurers, you have a single policy from one insurer. Since everything is one package, a BOP also lets you save money on premium costs.

Interested in learning more about a professional insurance liability insurance policy for your business? At Knight-Dik Insurance, we’ll work with you to design coverage that protects your business from a variety of risks, unique to you. For a free insurance premium analysis, simply contact us here or call 800-286-6353.