What is Liability Insurance? What will it Protect?
Starting a business includes a host of considerations, with insurance at the top of that list. There are many types of insurance a professional may decide to take out for their business. Professional Liability Insurance (PLI) is there to protect your assets and income if your business is sued.
Similar to Malpractice Insurance taken out by physicians, this type of policy covers financial losses associated with claims of negligence, personal or financial loss made in the course of your work. PLI will cover the costs associated with the defense of a civil claim against your business and any damages, judgments, or settlement amounts incurred.
General Liability Vs. Professional Liability Insurance
While doing your research, you may be wondering what does professional liability insurance cover that general liability insurance cannot?
A general liability policy will cover the costs of bodily injury, personal injury, and property damage claims that may arise when someone gets into a fender bender in your parking lot or twists their ankle on steps leaving your office. As the name suggests, general accidents or damages that happen outside of the scope of work you have completed.
Professional liability insurance covers claims made against the services you have provided. While we all strive to give every person we do business with exceptional service, there are times when errors happen or you are not able to fulfill the expectations laid out in your contract due to unforeseen circumstances.
PLI insurance protects you from the responsibility of covering the legal fees of the person suing you and from any financial damages they may be awarded if the civil case does not go in your favor.
If you’re still unclear about which type of claim would fall under which category, review these common claim examples:
| General Liability | Professional Liability |
| A client trips in your lobby, breaking their foot, and wants to be reimbursed for their medical fees. | A client claims their building renovation has been delayed due to poor project management and is suing for financial losses. |
| Your employee breaks an antique at a client’s home while moving furniture to bring in equipment. | You failed to inform a client of a filing deadline to appeal their judgment, and they are now suing you for negligence. |
| You share an image to social media of a completed iron fence in a client’s yard without their permission, and they file a personal injury claim due to invasion of privacy. | You arrive late to provide photography at a wedding, missing critical events, and the couple sue for breach of contract. |
What is Not Covered Under a Professional Liability Policy?
- Criminal Charges
- False Advertising
- Allegations of Fraud
- Sexual harassment
- Employee disputes
In addition to the above, PLI Policies do not reimburse or cover the equivalent value of patents, trade secrets, intellectual property, personally identifiable information, or similar assets that may be lost due to legal action taken against a professional.
Who Benefits from Professional Liability Insurance?
All professionals can benefit from having PLI insurance. Consultants, lawyers, financial advisors, and any service providers who offer professional advice are more susceptible to these types of claims. However, many other industries are at risk for claims a professional liability policy would cover, including real estate and construction, IT, and small business owners.
Depending on which state you live in, you may even be required to carry PLI Insurance.
How much will PLI cost?
Several factors go into determining the cost of a professional liability policy. The industry you are in and how common lawsuits are filed will play a large role, along with the number of employees you have and the location where services are provided.
Note that most PLI coverage is provided on a “shrinking limit” basis, meaning that defense costs are extracted from the total available coverage. Legal defense costs take up a significant portion of losses generated by civil actions against a professional or small business. You will need to ensure your coverage limit is adequate to provide for both legal representation and any subsequent money the person suing you could potentially obtain.
Find Out How Much PLI Coverage You Need
By now, you will have determined that if you provide professional services for a fee, you need protection against civil judgments. You may still be unsure of the amount of coverage you require or would like an individual evaluation of your needs as you grow in your career.
The Harris Insurance team is composed of a diverse group of insurance professionals that have over 100 years of combined insurance and risk management experience and are ready to answer your commercial insurance questions and provide you with a deeper look into what protections PLI policies can offer your business. Contact us the Harris Insurance team online or call 855-202-6611 to get started.