What does professional liability insurance cover?
Professional liability insurance covers you when a client sues because of mistakes, errors, or under-qualified work produced by your company. The costs this policy can cover include legal defense for lawsuits related to negligence claims, undelivered services, inaccurate advice, work mistakes, and missed deadlines.
If your company doesn’t meet professional standards set within a contract, the client could sue you for negligence. A professional liability insurance policy would cover the costs for legal defense and any resulting monetary compensation.
When services are agreed upon in a contract and are undelivered, a client can bring a lawsuit against your business. These lawsuits can get even more expensive if the undelivered work results in the client losing revenue.
Consultants are frequently guiding their clients to make large financial decisions that can change the course of a business. If that advice is considered grossly inaccurate and the client brings a lawsuit, professional liability will cover the expenses.
If a mistake or oversight results in the client losing money, they might sue over lost revenue or other damages. Professional liability insurance can help cover lawsuits related to mistakes made by your business.
A missed deadline can delay larger projects and cause financial hardship for the others involved. If a client starts a lawsuit over late work, professional liability insurance can help cover litigation costs.
What does professional liability insurance NOT cover?
Professional liability insurance will not cover everything. It specifically covers lawsuits due to issues with produced services. It does not cover anything regarding intentional wrongdoing, customer injuries, employee injuries, damage to business property, employee discrimination lawsuits, vehicle damage, or data breaches.
If your business breaks the law while providing services or intentionally deceives a client, professional liability insurance will not cover the resulting damages.
Customer injuries or property damage
When a customer is injured or their property is damaged, it is not covered by your professional liability insurance. You will require a general liability insurance or business owner’s policy to cover damages associated with customer injuries or property damage.
Injuries to employees that are sustained within the course and scope of their work duties are only included in workers’ compensation insurance policies.
Damage to company property
If business-owned property or inventory is damaged, it is not covered under a professional liability insurance policy. The company will require a commercial property insurance policy.
Employee discrimination lawsuits
If an employee files a discrimination, wrongful termination, or hiring lawsuit, your company will need to have employment practices liability insurance (EPLI). A professional liability insurance policy will not cover claims due to harassment, wrongful termination, or discrimination lawsuits or settlements.
Damage to company vehicles
Any business-owned vehicle needs to be covered by a commercial auto insurance policy and personal vehicles used for business purposes require hired and non-owned auto insurance.
If a business or their clients have damage due to a cybersecurity breach, a professional liability insurance policy will not cover expenses. The company will need a cyber liability insurance policy to help with data breach expenses.