One Must Have Coverage That Your General Liability Insurance Won't Cover

We’ve all heard at least one medical malpractice horror story. Patients who trusted themselves to the hands of specialized professionals who made major mistakes—amputating the wrong leg, leaving surgical tools inside the patient, accidentally artificially inseminating the wrong person, the list could go on. There are so many things that can and do go wrong in the medical field, and a large price to pay when those lawsuits inevitably roll out.

Professional liability insurance (PLI) is the key to financial security in cases like these—but if you’re not in the medical field, don’t write this off as unnecessary for you. The medical field is not the only field that should be concerned about costly mistakes.

What is professional liability insurance and who needs it?

PLI insurance is a specialty coverage for claims against a business or their employees for negligence, misrepresentation, or inaccurate advice (none of which are covered under general liability insurance policies).

This is an insurance that should be strongly considered if you or your business use expertise in a specific field to:

-         Offer professional services directly to customers

-         Regularly give advice to clients

Some easy examples of professions or businesses that need PLI are lawyers, accountants, and physicians (malpractice horror stories, remember?).

That’s not all though; professionals such as graphic designers and florists should also consider coverage. What happens if a graphic designer’s client believes a logo they created was the cause for decreased sales? What if a florist is late in delivering flowers to a wedding? Even if a client thinks you or your business made a mistake, you could be in danger; those lawsuits can prove financial ruin. Especially for small businesses who never expected to be facing lawsuits in the first place.

How does the insurance work?

PLI policies will have a timeline that look a little bit like this:

Because PLI policies are written on a claims-made basis, this is an important timeline to understand. The coverage is triggered by claims made during the policy period (the gray box), as well as any made during the extended reporting period (this extends from the end of the policy period to an agreed upon end time, represented by the red dot—it can be 30-60 days, or longer depending on your policy). Whatever incident has given rise to the claim does not have to have occurred during the policy period, it only has to have occurred after the retroactive date.

For example, say a CPA holds a PLI policy in which the retroactive date is in 2017, the policy period is January 1st -December 31st of 2021, with an extended reporting period of 30 days after.

The CPA neglected to file a required form when preparing a client’s taxes in 2018. This is not caught until late 2021, so the client reports a claim in early January 2022 against the CPA. Because the incident of negligence happened after the retroactive date, and the claim was reported during the extended reporting period, the CPA’s professional liability insurance will help cover the costs of their mistake.

What is not covered?

PLI does not cover claims of bodily injury or property damage (these would be covered by general liability insurance), work related illnesses and injuries (worker’s compensation, if employees are the ones injured or ill), or data breeches (this would be covered by a cyber liability insurance).

PLI does not include coverage for criminal prosecutions, and the covered forms of legal liability under civil law will be listed in the policy.

Do you need professional liability insurance?

No one wants to think that they will make a mistake, especially one that costs their business thousands (if not more). If you’ve read through this entire post and you now have a little twinge of unease…chances are you’re in need of professional liability insurance to protect you against those unforeseen, unexpected mistakes. PLI covers more than those horror story medical malpractice cases; it also covers the small, local businesses who put their heart and souls into the work they do. Don’t make the mistake of thinking it could never happen to you.

Town & Country Insurance puts their heart and soul into those small, local businesses—call up one of our agents and let’s get a professional liability insurance policy set up to protect you and your business from potential financial disaster!

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