Professional Liability
Could you business be sued for failing to render the service or product you offer?
Professional Liability Insurance, otherwise known as Errors and Omissions Insurance, protects a company from lawsuits that claim a financial loss occurred due to the negligent rendering of a professional service. In some industries, this coverage is either legally or contractually required in order for a company to operate, such as medical, legal, accounting, engineering, real estate, financial practice, or other similar industries that necessitate a certificate or license to conduct business. In many cases, companies involved in construction or design are required by general contractors to purchase this coverage. Non-profits, NGO’s, boards, or representatives of associations may purchase this coverage to also protect against the member’s personal liability, which may be exposed for lack of ‘due care’ without a properly constructed policy. Technology companies, particularly those involved with servicing the above mentioned industries, will typically also purchase this insurance, as even a minor glitch in programming, the installation of software or hardware, or breach of security measures added to protect valuable data or personal private information can lead to lawsuits amounting to millions of dollars in damages. Simply put, if your business provides professional advice, or a service that could potentially fail and cause financial harm to an individual or person, professional liability insurance should be an integral component of your business insurance.
Errors and Omissions Liability (E & O) – E & O covers any mistakes made by employees who work on behalf of your business, if your business charges fees for your services. It can include coverage for any errors such as failure to perform or violations of contract. Depending on your industry, your insurance needs will vary.
Directors and Officers Liability (D & O) – Having financial protection for your business’ Directors and Officers can prevent loss in the event that they are held liable from actions related to their corporate positions. This can include anything from conflicts of interest to mismanagement of company assets and violation of laws.
Fiduciary Liability – Fiduciary covers claims that involve the violation of the Employee Retirement Income Security Act, or ERISA. If a manager, for example, violates the financial obligations of ERISA, having the right coverage can protect your company if held liable in situations from imprudent investments to failure to enroll employees.
Employment Practices Liability – With proper insurance, your business can be protected if a worker claims that his or her rights have been violated. This can include violations from sexual harassment and discrimination to violations of the Americans with Disabilities Act (ADA), mismanagement of employee benefit plans, and wrongful termination.
Professional Liability Policies are particularly sensitive to lapses in coverage or cancellations. Because of the potentially unlimited size of such claims, most policies are provided on a ‘claims made’ basis, meaning coverage is only provided for claims made during the policy period. A general liability policy may be cancelled or non-renewed, but will often still cover claims reported after the policy period ends, assuming the incident occurred while the policy was active. If a professional liability policy lapses or is cancelled, most policies will void coverage for all prior incidents. This is why, even for a business that has discontinued operations, it is important to maintain coverage up to the ‘statute of limitations’ or ‘statute of repose’. Each state is different, but for instance, a law firm that drafts client contracts may conduct business in a state that holds the firm and officers legally liable for up to 3-7 years after the contract has been drafted, regardless of whether the firm stays in business, merges, or dissolves. For those businesses that have a professional liability policy, but discontinue operations, insurance companies will usually offer what is called an ‘extended reporting period’ to provide retroactive coverage after a business dissolves. Businesses that are acquired or merge with another business will want to secure a policy that provides coverage for ‘prior acts’ dating back to the beginning of the original policy, often referred to as the ‘retroactive date’.
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Boynton Insurance Group is staffed with professional liability experts who can help your business construct a customized policy to suit your organization’s needs. We have access to several of the most quality and competitively priced insurance carriers in your region. Our agency will analyze your business, suggest insurance solutions, implement the most suitable insurance coverage, and track your insurance policies to ensure that your business is protected from professional liability lawsuits.