Professional Liability Insurance, and it’s Nuances

Professional liability insurance (PLI), usually works for individuals who provide professional service or advice of a sort. It protects the professionals such as lawyers, accountants and doctors against negligence, or other similar claims by disgruntled clients. A client may suffer damages as a result of these services whether directly or indirectly. The resulting fallout from these damages may result in a lawsuit which might end up incurring restitution costs. Taking an insurance for this possibility allows individuals to not bear the full cost of damages awarded in the lawsuit.

A standard professional liability policy indemnifies the insured individual against any loss that may arise from one or more claims made during the insured period of time for any reason that has been covered under the policy, such as, human error, omission or neglect etc.

Professional Liability Insurance is also sometimes called as ‘Medical Malpractice Insurance’ or ‘Errors and Omissions Insurance’. It varies with the targeted profession.

PLI does not follow under Home Owner’s Endorsements, In-Home Business Policies, or Business Owner’s Insurance Policies. It is a special kind of coverage that has its own uniqueness. The only claims that are covered by it are those which were made during the period when policy was made because the PLI is usually arranged for clients on a claims-made basis. That is why the incidents that may or may not have occurred before the policy was finalized and put into effect may not be covered under it. however, it is possible for the policy to have a retroactive date.

Professional Liability Exclusions

Professional Liability Insurance Policy does not cover criminal prosecution. Neither does it cover any form of Legal Liability under the civil law.

The core policy may also not have an automatic inclusion of any kind of violation in cyber laws, data breaching or any other such technological issue. Usually, the technology related policies are issued separately.

Professional liability Wording

A PLI policy can be worded in many ways, depending upon the ones who design and offer it. may of the policies are designed to satisfy a minimum approved wording. This is done to make the comparison easier. There are other policies which differ dramatically in the coverage they provide, for instance, it may include a breach of duty clause which may render the agreement null and void.

Wordings with minor or major legal differences can be confusing to those who are not lawyers. The corporate language is pretty tough to understand especially when you include all the major jargon used in it. For instance, coverage for “negligent act, error or omission” indemnifies the policy holder against loss/circumstances incurred only as a result of any professional error or omission, or negligent act (i.e., the modifier “negligent” does not apply to all three categories, though any non-legal reader might assume that it did). Meanwhile, a “negligent act, negligent error or negligent omission” clause is a much more restrictive policy, which would deny coverage in a lawsuit alleging a non-negligent error or omission.

Professional liability insurance is required by law in certain practices due to the possibility of risk involved in them. There are several professions which are inherently dangerous. It is also to protect them from unethical clients who like to sue every other person for some monetary gain over the most superfluous of the reasons.

Some accusations by unsatisfied clientele also turn out to be baseless or outright false. This merely devolves to pointless accusations resulting in the legal action to turn groundless. In such a case coverage is provided for the defense costs.

An Example;

A job of a plastic surgeon is not exactly dangerous per se, but in places like Hollywood, there are plenty of superfluous people who see engage in unnecessary and sometimes outright useless kinds of medical procedures to increase their beauty. Sometimes it happens that they do not like the result of a surgery. Even if you had warned them beforehand, they would still pull out a phone and call their vulture attorney who will drag you off to the court to get a settlement from you in the millions. Those celebrities will also use the media and give interviews against you and turn the public opinion against you, thus making your position even more untenable. For such professions, it is an absolute must that you get a good Professional Liability Insurance which can save you from Bankruptcy.

You should utilize this service if:

Automation improves expense management and reduces that risk someone will re-submit expenses after a client has already paid the bill. This commonly happens with manual processes. Untimely expense submissions create cash flow issues.

  • Your Business provides a professional service.
  • Business includes giving out professional advice.
  • Your business is required by law to have E&O (Errors and Omissions) insurance.
  • Your business has possibility of suffering from Civil Liability.
  • A Business has the possibility of culpability in Legal Malpractice.

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