What is professional liability insurance

What is professional liability insurance? It is essentially a form of business insurance designed to protect your business against claims made by other people. Professional liability insurance, often known as professional indemnity insurance or professional mistakes & omissions in the US can help protect your business from claims made by other people. Claims made by employees, contractors and customers are covered under this type of insurance. Claims by vendors and suppliers are not covered.

If you are planning on expanding your business, it is a good idea to get professional liability coverage. Claims stemming from negligence, breach of warranty, product defect or even death can result in big losses for companies. Therefore, you need to take all necessary steps to mitigate your risk and minimize your exposure to claims. Professional indemnity insurance protects your assets, pays claims made by third parties and helps in dealing with customers and vendors who are skeptical about purchasing your products or services. Claims made under these circumstances can be quite difficult to prove.

You may be wondering what is Professional Liability Insurance. A good example is professional negligence, which refers to failure to perform a duty that resulted in harm or injury to a client. Professionalism is subjective. So, an insurance policy cannot define ‘professional’ – it can only explain what is professional and what is not. Here are some common examples under a Professional Liability Insurance policy.

Business Substantial Manufacturing Defect (BSMD) The most common claim-made against companies is Product Defect. A Product Defect occurs when a product, which is supposed to be safe, causes injury or damages to a customer/employee while the product is being used or being marketed. For instance, a car cover that was meant to provide maximum protection from collisions has the potential to cause fatal injuries when it accidentally gets damaged while being driven on the road. Similarly, a Software package meant to provide safe access to data is also potentially dangerous when it gets installed in a computer. Both these examples require Product and Service Liability Insurance.

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General Liability Insurance These types of claims are very common and deal with the negligence of third parties. Examples include Product or Service Liability, which pertains to negligence that is caused due to a Product or Service related fault. General Liability Insurance protects you against claims-made as a result of negligence. Here the focus is on damages, rather than fault.

Bodily Injury A bodily injury means physical harm, pain or suffering. For instance, a person being hit by a car would be classified as a bodily injury. A claim can be made for any injury above and beyond the general liability insurance limit. Typical examples include: a worker being injured at work; a child slipping and falling; a dog being injured in someone’s yard. These types of claims often lead to large settlements.

Property Damage is the term used when damage to real or personal property occurs as the direct result of negligence or wrong doing on the part of another. For example, if a tenant slips and falls on the property and is hurt, this can be considered property damage. When a building is destroyed as a result of fire for whatever reason, this can also be considered as property damage. Claims can be made under both General Liability and Professional Liability Insurance.

While these are the most common claims made under these policies, there can be additional claims made in either category. You need to check your policy carefully to be certain that you are covered and then follow all the required procedures to file the claims. You may need to hire an attorney to help you with filing your claims. While these might cost a little more than what is covered under your general services or property damage insurance, it will save you money in the long run. If you are unsure what is covered under your professional liability coverage, you should contact your agent.

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