PROFESSIONAL LIABILITY INSURANCE

Professional Liability Insurance

DEFINITION of Professional Liability Insurance:

Professional liability insurance protects professionals such as ,accountants, lawyers and physicians against negligence and other claims initiated by their clients. It is required by professional practices such as negligence, malpractice or  misrepresentation.

There are two types of professional liability polices: claims-made and occurrence. Most professional liability insurance policies are “claims-made,” meaning that the policy must be in effect both when the event took place and when a lawsuit is filed for a claim to be paid.

Professional liability insurance will pay the cost of legal defense against claims and payment of judgments against you, up to the limit of the policy.  If, however, you change careers or retire, you may want to purchase an “occurrence” policy that will cover any claim for an event that took place during the period of coverage—even if the suit is filed after the policy lapses. In general, coverage does not extend to non-financial losses or losses caused by intentional or dishonest acts.

A type of liability coverage designed to protect traditional professionals (e.g., accountants, attorneys) and quasi-professionals (e.g., real estate brokers, consultants) against liability incurred as a result of errors and omissions in performing their professional services. This is because the latter two types of loss are typically covered under commercial general liability (CGL) policies. Although there are a few exceptions (e.g., physicians, architects, and engineers), most professional liability policies only cover economic or financial losses suffered by third parties, as opposed to bodily injury (BI) and property damage (PD) claims.

Accordingly, when attempting to determine appropriate policy limits, insureds must consider the fact that because defense costs are often a high proportion of any claim settlement or judgment, they must usually purchase additional limits. The vast majority of professional liability policies are written with claims-made coverage triggers. In addition, professional liability policies contain what are known as "shrinking limits," meaning that unlike CGL policies the insurer's payment of defense costs reduces available policy limits. 

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