Professional liability covers professionals for negligence and errors or omissions that clients claim have injured them. Professionals are expected to have extensive technical knowledge or training in their particular area of expertise. They’re also expected to perform the services for which they were hired, according to the standards of conduct in their profession. If they fail to use the degree of skill expected of them, they can be held responsible in a court of law for any harm they cause to another person or business. When liability is limited to acts of negligence, professional liability insurance may be called “errors and omissions” liability.
Professional liability insurance is a specialty coverage which is not included in standard business policies. This is because a typical general liability insurance policy will only respond to a bodily injury, property damage, personal injury or advertising injury claim. Professional liability will protect against claims without causing a bodily injury, property damage, personal injury or advertising injury. Common reasons alleged in making claims on these policies are negligence, misrepresentation, violation of good faith, fair dealing, and inaccurate advice.
For example, if a software product fails to perform properly, it may not cause physical damages, personal, or advertising injuries, therefore the general liability policy would not be triggered. It may, however, directly cause financial losses which could potentially be attributed to the software developer’s misrepresentation of the product capabilities.
Professional liability insurance policies are generally set up based on a claims-made basis, meaning that the policy only covers incidents that occurred during the time frame in which the coverage was active. It is important to continue your coverage, because canceling the policy, will in effect, make it as if you never had coverage.