Why Your Firm May Need Professional Liability Coverage

​A majority of companies are leaving themselves exposed to lawsuits as they take on high-end professional services work and demands grow for expedited deadlines.

​In fact, a recent report by Forbes Insights and The Hanover found that 40% of small business owners believe they face professional risks, yet they have not purchased professional liability coverage as part of their overall insurance package. 

Professional liability insurance in the past was mainly purchased by architects, accountants and lawyers, but with more work like coding, programing and other ventures spawned by technology, the need for this type of protection has grown.

Professional liability insurance, also called errors and omissions insurance (E & O insurance), protects your business if you are sued for negligently performing your services, even if you haven't made a mistake.

Businesses that need professional services coverage include:

• Graphic design firms
• Marketing and advertising firms
• Technology and software firms
• Architects and engineers
• Real estate agencies
• Consultants
• Medical professionals
• Wedding and event planners.

 
Coverage gaps
If you are relying solely on a general liability policy, it may not cover you in the event of a lawsuit over an issue with the services that you have rendered.

Professional liability coverage can be especially important if you have customers who sue you for non-performance of your products or services, or withhold payment due to a contract dispute.

This is especially true if you are:

• Performing consulting work, training or other services for customers.
• Involved in work requiring special licenses.
• Designing, recommending, installing or testing products.
• Designing software or apps to a client's specifications.

 
What it covers

Negligence -Professional liability insurance coverage can protect you and your business against actual or alleged errors and omissions that may occur while providing your professional services.
These claims can include anything from giving incorrect advice or omitting a piece of information, to failing to deliver your service within a desired timeframe.

Legal costs -The policy includes covering your legal costs in defending against a claim. Some insurers will even appoint an attorney to represent you.
 
Examples

• A marketing consultant develops a drip email campaign for a retailer that doesn't generate the number of leads expected. 
• A management consultant develops an organizational strategy to improve communications in a company, but problems persist at the client and communications don't improve. 
• A software developer fails to develop an app to the client's specifications.

 
In all of these examples, a client may sue for damages. And in every instance, a professional liability insurance policy should help protect you and your firm.