Professional liability, also known as errors and omissions, provides coverage to individuals and businesses who perform professional services. In general, these types of policies provide protection from claims for monetary damages that arise out of the duties or activities of a professional.
These claims are not normally covered by a general liability policy. This is why a professional liability policy is needed. Professionals who utilize this type of liability coverage usually include lawyers, software developers, architects, engineers, real estate brokers, accountants, and inspectors. The different professions sometimes have different names for the same kind of coverage. For example, real estate brokers buy “errors and omissions” coverage, doctors utilize “malpractice” coverage, and tech companies need “professional liability”.
Several of the common claims that a professional liability policy may protect against are:
- Failure to act
- Inaccurate advice
- Violation of good faith
Certain contractors may have a need for professional liability as well. Contractors can be held responsible for errors or omissions made during the design and build process. Even if a contractor sub contracts the engineering and design of a project they could still be held responsible for the related damages that could occur. A few examples of situations that a contractor’s professional liability policy could respond to are:
- Improper design of a floor that cracks
- Installation of an HVAC system that does not meet ventilation requirements
- A flaw in construction of a building causes a business to lose income while repairs are made
Another common difference between a general liability policy and a professional liability policy is when the coverage applies. Professional policies are usually written on a “claims-made” basis. This mean the policy will only cover claims that are made during the policy period. General liability policies typically provide coverage based on when the damage occurs not when the claim is made. This means only a current and active professional liability policy can provide coverage and coverage should be carried for long periods of time in case a claim is made for a loss that happened in the past.
Professional liability policies are usually tailored specifically for the industry or professional they are writing coverage for. Contractors professional coverage could additional coverage for faulty workmanship while a technology company may need specific coverage for liability arising out of the failure to protect confidential data, information, or software.