WD Royal Insurance: Your Trusted Independent Insurance Agency For Professional Liability Insurance

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Professional liability insurance (PLI), also known as errors and omissions (E&O) insurance, protects businesses and professionals from financial losses due to claims of negligence or mistakes in the professional services they provide. It covers legal defense costs, settlements, and judgments, even for baseless lawsuits, and is distinct from general liability insurance, which covers physical risks like bodily injury and property damage.

Who needs professional liability insurance?

Any individual or business that provides professional advice or services for a fee should consider PLI, including: 

• Accountants and financial advisors
• Architects and engineers
• Attorneys
• Consultants (including management, IT, and marketing)
• Healthcare professionals (where it is called malpractice insurance)
• Home inspectors
• Real estate agents and brokers
• Software developers 

In certain professions and locations, this coverage may be legally required or mandated  by client contracts.

What professional liability insurance covers

A PLI policy can provide coverage for a wide range of claims stemming from your professional services: 

• Negligence and mistakes: Claims that your professional services were inadequate or caused a financial loss for the client.
• Inaccurate advice: Lawsuits resulting from advice you provided that caused financial harm to a client.
• Misrepresentation: Claims that you made false or misleading statements to a client that led them into a harmful contract.
• Undelivered or incomplete services: If a client claims you failed to deliver promised services or missed a deadline.
• Defense costs: Coverage for legal defense, attorney fees, and court-related expenses, even if a lawsuit is without merit.
• Copyright infringement: Claims that you used a client's copyrighted work without permission.

• Libel and slander: Claims of personal injury due to defamatory statements made in a professional capacity. 

What is typically excluded

While coverage varies by policy, PLI does not cover every type of business risk. Common exclusions include: 

• Bodily injury and property damage: These are covered by general liability insurance.
• Criminal or illegal acts: Coverage does not extend to intentionally dishonest or unlawful actions.
• Intentional acts: Liability arising from intentional misconduct is not covered.
• Employee injuries: This is covered by workers' compensation insurance.
• Vehicle accidents: Commercial auto insurance covers accidents involving business vehicles.
• Employee-related lawsuits: Claims like harassment or discrimination are typically covered by employment practices liability insurance (EPLI). 

How policies work

PLI policies are typically structured in one of two ways: 

• Claims-made: This is the most common form of professional liability. It covers claims that are filed during the policy period for incidents that occurred on or after a specified retroactive date.
• Occurrence: This policy covers any covered incident that happened while the policy was active, regardless of when the claim is reported. 

Key terms

• Errors and Omissions (E&O) insurance: An interchangeable term for professional liability insurance.
• Malpractice insurance: A specific type of professional liability insurance used by healthcare providers and attorneys.
• Indemnity insurance: A broader category of insurance that includes professional liability.
• Retroactive date: A date on a claims-made policy that specifies how far back an insurer will cover incidents.
• Extended reporting period ("tail" coverage): An optional add-on that extends the time you can report a claim after your policy has expired.