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Professional liability Insurance
Professional liability Insurance is also known as Errors and Omissions Insurance. This type of insurance coverage is designed to protect you, your company and your employees if a service that you render is claimed to have done harm to a customer. Specifically if a customer claims you have caused them financial loss of some sort by your actions, professional liability insurance covers you from having to personally shoulder that liability.
Professional liability insurance is particularly important for service related businesses. However, not all insurance companies offer this coverage, while others only offer it to certain types of companies because they specialize in coverage for those specific industries.
Professional liability coverage is useful for protecting some businesses and specialists because there is such a strong human element involved with providing services. For example, an accountant office cannot provide services to clients without having accountants on the payroll, and when people are the primary source of goods and services, there is always a slight risk of errors arising.
If a stock broker accidentally puts a comma in the place of a period for a client's stock purchase order, the client can sue for the financial damages and loss that arise from that mistake. If a tax preparer forgets to sign and date the customer's income tax return and it is denied by the IRS, the customer may be subjected to financial loss in the form of fines and penalties because the valid signed and dated tax return was sent in after the April 15th deadline. The customer rightly has a claim for this error against their tax preparer.
In both of the examples above, the stock broker and tax preparer can elect to purchase professional liability insurance to help cover themselves and their businesses from these types of errors and omissions that cost their clients additional fees and expenses.
Professional liability insurance is normally available in one million dollar increments and they can have deductibles that range from $1,000 to $25,000 for each claim.
Coverage Conditions and Limitations
Most professional liability insurance policies are designed to cover specific types of claims. This means that the policy will not automatically cover any errors or omissions that arise from the actions of you or your business employees. The only risks that are covered in the professional liability policy are those that are specifically listed on your insurance policy contract.
The policy must also be fully in force at the time of the claim in order to provide coverage for a loss. Any claim that a client or customer makes against your business or an employee of your business must be a listed claim on your coverage, and must have allegedly occurred while your policy was active in addition to the coverage being active when the claim is filed. In other words, if a customer makes a professional liability claim against your company two years after an event supposedly transpired, your professional liability coverage must still be active in order to use it against the claim. If the policy expired or was dropped the year before your customer brought the suit against you, the professional liability insurance will not cover you against the claim.
Protecting Your Business
Due to the conditions and restrictions that are associated with most professional liability insurance policies, the best action you can take for your business is to get the coverage and keep it in place at all times. With continued active coverage, you won't have to worry about how far into the future one of your clients or customer decides to sue you for allegedly causing them financial harm and loss.
Professional liability insurance policies specifically do not cover loss claims that are related to you or your company breaching a contract or intentionally causing damage. The best way to protect yourself and your company from this type of legal action is to create solid contracts and agreements with your customers before providing professional services for them.
Professional liability or errors and omissions legal suits can often be avoided simply by staying on good terms with your customers and clients.
Every industry has its busy season and every business has its times of stress. Stress and high levels of activity can cause mistakes to happen to even the best people you know. It's because of these potential mistakes that professional liability insurance is so important to your company.
However, sometimes clients have other expectations of your business services, or they feel slighted by something you say or do. So even when there have been no errors or omissions, a customer may try to accuse you of wrong doing anyway. By keeping your relationships with customers and clients on the best footing possible, you reduce the chances of having to deal with this type of lawsuit.
Since you cannot always guarantee the temperament of your clients, there is always the possibility that no matter how much you try to keep the relationship on good terms, a client will make negligence or error claims against you, one of your employees that provided them the services, or your company in general. And it's this uncertainty that makes professional liability insurance coverage so necessary.
Whether you make a mistake that costs your client money or you don't, any claims to the effect against your company will cost you both time and money to settle. With professional liability insurance coverage you do not have to worry about the potential costs of a claim, and you have the added peace of mind that if you do end up with a mistake on your or your employee's part, your insurance will take care of the majority of the claim.
Before taking on a professional liability policy, sit down and make a list of the most common potential problem areas that might put your business at risk. For stock brokers and tax preparers it may be that simple data entry is the most probable type of mistake that can happen. An auto repair business may be most at risk for an employee forgetting to tighten a bolt and in a catering business the risk might be using ingredients in a meal that your customer has notified you they're allergic to.
Your business has its own unique risks and areas for potential errors. Consider these in full and talk to your insurance agent about them so that you can be sure you're getting the right type and amount of professional liability insurance that is appropriate for your specific business.
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