Professional liability insurance protects against claims arising from your acts, errors or omissions in rendering services of a professional nature. Businesses involved in everything from advertising to engineering need to consider this coverage seriously. In fact, users of services such as those provided by lawyers and accountants often require that the insurance be in place before contracting with the professional.

What is a "Professional"?

The definition of a "professional" has expanded over the years to include those occupations in which special knowledge, skills and close client relationships are paramount. More and more occupations are considered professional occupations, as the trend in American business continues to grow from a manufacturing-based economy to a service-oriented economy. Coupled with the litigious nature of our society, the companies and staff in the service economy are subject to greater exposure to malpractice claims than ever before.

Tips for minimizing chances of malpractice

The policies typically include coverage for defense costs, even if a suit proves to have no merit. The policy premium is usually based on the following factors: the profession involved, the number of professionals covered, annual revenues, location of the business, the limit of liability and the deductible. Applicants are encouraged to shop carefully for this protection, since eligibility requirements, underwriting criteria, policy language and pricing do vary among insurers.

The "insured" in many of these policies includes the covered organization itself and its past or present partners, directors, officers, and employees while acting within the scope of their duties.

Some policy forms are tailored to a single profession, while others insure the acts of the professional by describing them in a space on the policy declarations page or in an endorsement. A few professionals may obtain professional liability insurance in a business owners policy (BOP) or similar package-type policy available from some insurers. More often, it is necessary to secure a separate policy that may be sponsored or endorsed by a trade association.

Types of Suits

Of the suits that can be brought against professionals, the two most common are breach of contract and negligence in the performance of services. Negligence suits, which are more frequently made, arise from damages sustained due to a professional's failure to perform according to known standards of conduct in his or her field.

Financial consequences of such suits, including the costs to defend them, may be severe. It is critical that professionals recognize their exposures to financial losses, and adopt a risk policy to deal with these exposures.
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