Architects, Accountants and Other Professionals Need Professional Liability Insurance
Professionals of all kinds work hard to provide high quality advice and service to their clients. But in our litigious society, the threat of a lawsuit from a client who feels he or she has been wronged is always possible. For this reason, many professionals—accountants, architects, lawyers, physicians, and more—need professional liability insurance.
Even the best accountants, architects and lawyers make mistakes. It is simply unavoidable. What you don’t know is whether or not you might be sued for any financial losses those mistakes create for a client. You need professional liability insurance to protect you from any claims of negligence your clients make against you.
A professional liability—or errors and omissions (E&O)—insurance policy provides protection for you if a client sues you for negligence or other wrongdoing related to your work. It covers professionals, their partners, their employees and the partnership or corporation for actual or alleged errors, omissions, negligence, breach of duty, misleading statements, and similar claims resulting from the performance—or non-performance—of professional services. For lawyers, accountants, architects, real estate agents, actuaries, consulting firms and other professionals, the damage to the client is typically financial loss that is a direct result of the professional’s work. Other professions, such as physicians, face a much greater scope of potential damages.
Most professional liability policies cover your defense costs as well as settlements and judgments. There is no standard policy language for E&O policies, and every type of professional or professional services firm has different types of exposures that need to be addressed. Insurance companies offer various unique policy forms that are suitable for certain professions, including accountants and architects.
There are two types of professional liability policies. “Claims made” or “claims made and reported” policies mean that claims must be made, or in some cases made and reported, within the policy period. These policies specify a retroactive date to allow for damages that occurred before the policy was in force to be reported after the policy is in force. Any claims that occurred before the retroactive date would not be covered. Conversely, medical malpractice insurance is a type of professional liability insurance that is usually written on an “occurrence” basis, which means that the act, error or omission must occur during the policy period and the claim can be made anytime thereafter, even after the policy has been canceled.
It is important to understand this distinction and be aware of the specifics of your professional liability policy.
E&O policies typically exclude coverage for:
- Criminal, fraudulent or malicious acts
- Bodily injury and property damage (this may not apply for certain design professionals)
- Workers’ compensation claims
- Punitive damages
- Losses related to vehicle liability, general liability and property claims
Accountants, architects, lawyers, physicians and many other types of professionals must invest in professional liability insurance to protect themselves in the event of a lawsuit related to the services or advice they provide. We can help you find the best policy for your profession, and make sure that you are protected.
Have you ever been involved in a lawsuit with one of your clients? How did you survive? Did you have E&O coverage?