What is it?
Professional liability insurance, also referred to as Errors & Omissions, protects businesses or individuals in the event that a client holds them responsible for a service that was provided and did not have the expected or intended results. Put simply, it protects an insured for a service performed for a client and that client claims it was done incorrectly and caused them harm.
You should consider professional liability insurance if your business:
- provides a professional service
- regularly gives advice to clients
- is requested by a client to have professional liability insurance to satisfy a contract
Tip: The chance of getting sued often has less to do with the quality of your work than with your clients’ temperament and expectations. If your client relationship goes sour for any reason, you could be accused of negligence even if you didn’t make any mistakes.
Potential causes for legal action are alleged failure to perform on the part of, financial loss caused by, and error or omission in the service or product sold by an individual or business.
BEWARE: Professional liability insurance is not provided by a commercial general liability policy. GL does not provide coverage for errors, contract performance disputes or any other professional liability issues.
How the Policy Works: Professional liability policies are sold on a “claims-made” basis. This means that the insurance only covers work performed wile the policy is in force, and for the claims filed during the term of the policy. If you cancel your E&O policy without arranging for an extended reporting period, your coverage would end and any claims submitted after the cancellation would not be covered, even though the work was performed while the policy was in effect. To ensure protection, you must continue your coverage long after your transaction is complete.
Before you purchase this type of insurance, it’s important to have a qualified insurance agent review your businesses specific exposure to risk. Chesapeake Insurance Services can help with your assessment and provide a customized policy to protect your business.