Professional Liability

What is professional liability insurance?

Professional liability insurance, also called errors & omissions (E&O) or professional indemnity insurance, protects professionals and their businesses against negligence claims from clients who say a mistake in the advice or service they provided caused them a financial loss. It’s built for a different kind of risk than general liability: mistakes in judgment or service, not physical injury or property damage.

What it covers

• Negligence, when a mistake made while providing a professional service causes a client financial loss
• Inaccurate advice, if guidance or counsel given to a client leads to a loss on their end
• Misrepresentation, false statements that affect a client’s decisions or void an agreement
• Violation of good faith and fair dealing, if a contract is entered into dishonestly or without the ability to fulfill it
• Legal defence costs, for claims brought against you, even if the claim doesn’t hold up

How it’s different from general liability

General liability covers bodily injury and property damage. Professional liability covers financial loss caused by a mistake, omission, or bad advice in the professional service itself. Most businesses that give advice, service, or expertise to clients need both, since one covers physical harm and the other covers the work itself.

Who needs it

Any business or individual that provides professional advice or a specialized service, consultants, advisors, agencies, and contractors all carry this exposure. Claims tend to become more frequent in a struggling economy, which makes this coverage worth carrying even when things are going well.

What it typically doesn’t cover

• Bodily injury or property damage (that’s general liability)
• Intentional wrongdoing or criminal acts
• Claims outside the scope of the professional service actually provided