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  • Professional Liability: What You Need To Know
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    What Is Professional Liability Insurance?

    Professional liability insurance, more commonly known as errors and omissions (E&O insurance), is a special type of coverage that protects your company against claims that a professional service you provided caused your client to suffer financial harm due to mistakes on your part (errors) or because you failed to perform some service (omissions).

    E&O insurance can cover the cost of defending your company in a civil lawsuit and certain damages awarded, even if the legal action turns out to be groundless. Professional liability insurance is required by law in some areas for certain kinds of professional practices, especially medical and legal, where it is more commonly called malpractice insurance. This type of protection is not part of your general liability insurance or homeowners insurance.

    Coverage does not include criminal prosecution, and there is a wide range of potential liabilities under civil laws that may not be covered unless written explicitly into the professional liability insurance policy. Common claims that professional liability insurance covers are negligence, misrepresentation, violation of good faith and fair dealing, and inaccurate advice. Some policies could also cover privacy violations.

    Many types of businesses need professional liability insurance. If your company business works directly with customers while providing services, you should consider professional liability insurance:

    • Technology professionals can benefit from E&O insurance because when technology fails, the financial impact to their business can be significant. Traditional liability insurance policies are not designed to respond to these claims, so professional liability can be extremely beneficial for software and technology companies, as well as hardware and electronic manufacturing businesses.
    • Legal professionals have two options for professional liability insurance from The Hartford. Depending on the size of the law firm, more than 20 attorneys or less than 20 attorneys, The Hartford’s team of underwriters offers E&O insurance coverage either through the Target Professionals Program or on an excess basis.
    • Real estate professionals may need protection against losses resulting from negligence or errors and omissions in the performance of their services.

    In addition to E&O insurance, may businesses may need Management Liability Insurance as well.  This coverage is designed to help protect directors and partners from financially devastating lawsuits. Many small businesses, the best solution is a Business Owner’s Policy, which includes professional liability coverage.

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    You can get highly detailed publications covering every aspect of professional liability insurance from the International Risk Management Institute, Inc. (IRMI). Also, state and national professional organizations may be a source of information and perspective on the coverage you may need.