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what is professional liability insurance

Professional Liability Coverage

Prime Insurance Company, an excess and surplus lines insurance company offering underwriting, risk management, claims, brokerage, and financing services nationwide. Prime currently holds an A.M. Best rating of “A” Excellent.

What is Professional Liability Insurance?

Professional Liability Insurance, also known as errors & omissions (E&O) insurance, provides financial protection for businesses and professionals in the event they are sued in conjunction with the performance of their duties as they relate to the services provided by a company or professional.

When is Professional Liability Insurance Needed?

Professional liability insurance is needed if a business, organization, professional, etc. provides a professional service, regularly gives advice, or is required by its clients to have E&O insurance.

Why is Professional Liability Needed?

For a professional services business or professional, having professional liability coverage can be an integral part of protecting the business and professional. Accusations of negligence or the failure to perform professional services are things that any professional services business or professional may be sued for, even if they haven’t made a mistake.

Examples of Professional Liability Insurance Policies

  1. Property Managers
    • Wrongful eviction: As a property manager, you are responsible for evictions. Not following the proper eviction process can lead to claims being brought against you.
    • Tenant discrimination: Claims of discrimination are a common risk that property managers face. A potential tenant also may claim that you did not rent a property to them based on their race, religion, or gender, even if you’ve done nothing of the sort.
    • Having the right professional liability insurance will cover you when current or potential tenants claim that you wrongfully discriminated against them.
  2. Real Estate Agents
    • Buyer’s remorse: With the continued decline of property values, clients may blame you for feeling like they overpaid for their new home. You could face a claim that you were negligent in researching the home’s value. Professional liability insurance will protect you even if you haven’t made this mistake and the allegations are groundless.
    • Wrongful discrimination: Claims of discrimination are a common risk that real estate agents face. Clients may claim that you did not show them certain homes because of their race, religion, or gender – even if you’ve done nothing of the sort. Having the right professional liability insurance will protect you if a client makes a claim of wrongful discrimination against you.
  3. Web Designers
    • Creative differences: Although it might not be your fault, a website you have designed may not live up to your client’s expectations or may not function properly. Having the proper insurance for web design will protect you against claims of negligence, even if you haven’t made a mistake.
    • Copyright infringement: We customize your coverage by automatically adding $200,000 of coverage for copyright infringement since this is a common risk for graphic designers.
  4. Architects and Engineers
    • Misinterpretation of renderings: A designer misinterprets your renderings and orders costly materials that are not going to work with your plans. Your mutual client is upset and sues both of you for professional negligence and demands that you reimburse him for the useless materials. You do not believe this is your fault but you have been named in the lawsuit and have a responsibility to appear in court. We will appoint an attorney to defend you.
    • The wrong advice: You advise a client to purchase a particular style of ramp for disabled individuals that you believe meets ADA standards. Turns out you were wrong, as the ramp has been outdated for some time. If you are required to appear at a hearing as a result of this error and resulting code violation, we will pay up to $5,000 to defend you.
  5. Marketing Professionals
    • Marketing service providers should seriously consider professional liability insurance (errors and omissions insurance). This protects your business from any mistakes made in the marketing services you provide that may lead to claims against your business. We customize your coverage by automatically adding $200,000 of coverage for copyright infringement since this is a common risk for marketing professionals.
  6. Business Consultants
    • Project management out of control: You have been contracted by a client to come in and organize a project that has run past its due date and is over budget. You commit to bringing the project to completion. As you dig into the project you realize that the former project manager did not present your client with an accurate view of deliverables and you are facing a scope of work that is twice as long as your original projection. When you present this finding to your client they are angry and accuse you of not doing your due diligence of project review upfront before signing the contract.
    • Bookkeepers Journal entry error: As a bookkeeper you are responsible for recording the day-to-day financial transactions for small businesses, which can be an activity prone to simple human error.

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