What is "professional liability insurance"? Professional liability insurance is also known as "errors and omissions" insurance or "malpractice" insurance. It is purchased by architects, engineers and environmental consultants -- as well as doctors, lawyers, accountants, brokers and other licensed professionals -- to address business liability risks that are not covered by their commercial general liability (CGL) policies.
Back to TopWhy should I buy professional liability insurance? For several reasons:
- To protect your firm and employees from serious financial disruption.
- To provide your clients with financial security for your design and consulting services.
- To access projects and clients that you may otherwise miss.
- To receive loss prevention information and consultation.
- To have a "damage control" team available should problems arise.
- Because your client requires it.
- For your peace of mind.
Back to Top What does it cover? The policy pays other parties for damages which you are legally liable to pay as a result of negligent acts, errors or omissions in the performance of your professional service. Those damages can include property damage, bodily injury, economic loss and legal expenses. The insurance company has an obligation to defend you against such claims, even if the allegations ultimately are determined to be false or groundless. The terms of a policy control the coverage afforded by the particular contract. The policy should be reviewed for a complete description of coverage and limitations.
Back to TopHow does it work?Policies are generally written on a "claims-made" or "claims-made and reported" form. These policies cover only those claims made against you and reported to the insurance company during the policy term and any extended reporting period, subject to the retroactive date on your policy. The amount of coverage depends upon the policy limit you choose. It is also subject to your payment of the deductible amount for each claim.
Back to TopWhat is the retroactive date? The retroactive date is the date after which the professional activities of your firm are considered to be covered by the policy. This may be the date on which you first purchased and have since maintained continuous coverage, the inception date of your firm, or some other date offered by your insurer. Remember, the insurance company covering you at the time the claim is made is the one to look to for protection, not the company covering you at the time of the alleged error.
Back to TopWhat is the difference between a professional liability policy and a commercial general liability policy for design and environmental professionals? A professional liability policy for design and environmental professionals covers their negligent acts, errors or omissions in performing professional services (such as mistakes in the preparation of plans or specifications, in rendering their professional opinions, surveying errors or a failure to provide services in accordance with the normal standard of care). A commercial general liability (CGL) policy typically covers claims for bodily injury and property damage that do not arise out of professional services, both inside and outside their office premises (such as when someone coming to their office slips and falls).
Back to Top What is the difference between a claims-made and an occurrence type policy? Professional liability insurance is written on a "claims-made" or "claims-made and reported" basis subject to the policy retroactive date. Claims-made professional liability policies only cover claims made against you and reported to the carrier during the policy period. Commercial general liability insurance policies are written on an occurrence basis because the date of accident or occurrence is readily ascertainable. The occurrence is covered by the policy in force on the date of the event (bodily injury or property damage) no matter how long thereafter the claim or suit is brought.
Back to TopHow do I select a professional liability insurance carrier?At first, you may not notice a whole lot of difference between one insurance carrier or policy and another. However, there are a lot of differences that determine the quality of coverage and services you receive. Criteria you should consider include:
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- How long has this company been providing PL insurance to design firms?
- Does the company and its agents specialize in serving the design community?
- What financial ratings does the company have from A.M. Best and other insurance rating companies?
- What loss prevention and practice management educational programs do they offer?
- What is their claims service philosophy? Do they provide pre-claims assistance and promote mediation and other alternative dispute resolution techniques?
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