What Does Professional Liability Insurance cover?
Professional liability insurance covers financial losses associated with claims of negligence, personal loss, or financial loss made in the course of their work. This type of coverage is usually similar to errors and omissions (E&O) insurance.
A professional liability insurance (PLI) policy does not cover liabilities that would normally be covered by a general liability policy. For instance, bodily injury (BI) and property damage (PD) claims are not covered. Instead, PLI coverage extends to defense costs associated with certain civil litigation actions and any subsequent damages or settlement amounts incurred by such a case.
Nearly every professional can benefit from having PLI insurance, particularly those who grant professional advice within their services, such as lawyers, accountants, financial advisers, engineers and consultants of all types. One can think of it as similar to malpractice insurance and how it protects physicians.
To learn more about what a PLI insurance policy may or may not cover, read on.
Professional Liability Insurance Provides Coverage Where General Liability Does Not
Say, for instance, a contract was made to create a luxury clothing line for a client company under their brand name. If the client later comes back to the manufacturer saying they designed the clothes poorly, used substandard materials and engaged in inferior manufacturing practices, a general liability policy would not cover related defense costs and damages since there was no alleged bodily harm or property damage.
Nevertheless, the client alleges they sustained losses to their brand and sales, and they want to recover these losses from the original manufacturer who promised to fulfill the request for high-quality luxury items. A professional liability policy can provide coverage to the manufacturer in this instance for both damages or settlement money paid and any related defense costs.
Note that most PLI coverage is provided on a “shrinking limit” basis, meaning that defense costs are extracted from the total available coverage. Since defense costs often constitute a significant portion of losses generated by civil actions against a company or professional, then companies should ensure their coverage limit is adequate to provide for both legal representation and any subsequent money the plaintiff could potentially obtain.
What is not covered by a Professional Liability?
Professional liability policies exempt coverage for criminal charges, false advertising, fraud allegations, or internal employment disputes. They also do not cover the equivalent value of any patents, trade secrets, intellectual property, personally identifiable information or similar assets that may be lost as a result of legal action taken against a professional.
Learn More About PLI Policies by Speaking With a Commercial Insurance Carrier in Nevada
Those whose careers depend upon their professional advice and input and concerned about the risks of certain allegations can protect themselves by looking deeper into what a PLI or E&O policies can offer. You can speak with an agent for a commercial insurance carrier in Nevada today to learn more about your options for protecting yourself and your business.