Professionals, such as doctors, lawyers and accountants, along with a growing number of other occupations, such as pharmacists, architects, engineers, opticians, beauticians, insurance agents, and various types of consultants are also targeted by lawsuits due to the high standard of accountability under which they operate and need special insurance protection.
Professionals are expected to have a certain level of competence in their disciplines. It’s also expected that they will accurately perform their services, according to the common standards of conduct for their profession. If a professional makes a mistake on the job, they can be held responsible for any harm they cause to a person or business.
Professional liability insurance policies are generally issued on a claims-made basis, meaning that the coverage extends only to events that occurred during the period in which the coverage was active. It’s important to not let coverage lapse in order to ensure continuous protection against damaging events even if they occurred in the past.
In most instances, a general or commercial general liability policy will protect a business against damage or injury their actions may cause to others. However, a Professional Liability policy is designed to handle loss associated with consultants for whom incorrect advice or a failure to perform professional services could lead to a lawsuit Much more is at stake with professional activities such as the following:
Expert Status–Persons who need professional liability coverage are those whom the general public depend upon as experts. They provide assistance with special issues such as personal health, expensive business transactions, or personal crises. Many of these situations also involve a high-level of emotion. When something goes wrong, it is much more likely that a client will pursue “justice” through the courts.
Reputation–Any claim a client makes against a professional involves that individual’s reputation. In many instances, paying a claim bears the stigma of admitting to a mistake. The professional may suffer from a lowered status and could face sanctions from related professional associations or regulatory authorities. Further, many professionals are proud of their standing and their abilities; admitting being wrong is usually fiercely resisted.
Defense Costs–Defending against claims of professional error or incompetence is usually very expensive and time-consuming. Trials will generally involve expert testimony and technical arguments and the likelihood of resolving issues quickly (particularly via a settlement) is extremely low.
Identifying A Loss–The timing between when a loss occurs and when a claim or suit is filed can be a mystery. A professional may find out she’s being sued today for something that happened ten years ago. The potential for a huge time gap before a loss arises makes professional liability a very difficult type of business to underwrite and to price.
Create a plan to avoid costly professional errors
If your profession makes you an expert in a certain area, like medicine, law or real estate, you could be exposed to one or more professional liability risks. No matter how careful you try to be, we’re all prone to make mistakes – in our personal lives and at work. Professional liability insurance might protect you against claims of negligence, malpractice or misrepresentation. Have a plan in place to reduce the possibility of making these mistakes on the job:
- Keep detailed project and client files
- Encourage honesty and openness from all of your employees
- Agree on expectations with your customers before work begins
- Make ethics a priority
- Stay within your area of expertise
You have invested a lot in your business and your profession. It is important to be sure that you take the steps to deal with the special as well as the routine sources of loss. As usual, it is always a good idea to discuss your questions and needs with an insurance professional.