Understanding Professional Liability Insurance Coverage

What is it?
Professional Liability Insurance (PLI), also called Professional Indemnity Insurance (PII) or Errors & Omissions (E&O) is a type of liability insurance, created for professionals who are in the consulting and/or services business. This prevents these types of professionals from having to bear the full cost of defense, in case a client files a negligence lawsuit against them, and/or the cost of the damages awarded to the client in case of a civil lawsuit.

Who requires it?
While this is not an exhaustive list, PLI/PII covers doctors, lawyers, insurance agents, property dealers, agents & brokers, investment advisors, financial service providers, architects, structural engineers, construction specialists, electricians, plumbers, software developers, website developers, application developers, software architects, project managers, business administrators, quality control / quality assurance consultants, Testing analysts, business analysts, transporters, etc. NGOs and non-profits.

Why is it so important?
Earlier, there was only the General Liability Insurance which covered physical harm caused to a person or property, as well as wrongful advertising. Then, as services companies became larger, there were other, newer forms of insurance which covered the employers, the public, the product, etc. But most of the consultants or service providers mentioned above rarely cause physical or advertising injuries. The claims are more in the nature of misrepresentation, negligence, bad faith, unfair business practices and incorrect advice. Hence, a newer form of Liability Insurance had to be created. Not having this cover can expose these consultants/service providers to expensive lawsuits, loss of reputation, and closure in some cases.

What does it cover?
PLI generally covers claims made during the policy period for any form of negligence, error or omission that may have occurred on part of the consultant/service provider. It rarely covers claims for these lapses that have occurred in the period preceding the start of the liability period, unless specifically mentioned in which case, it’s called a retroactive policy.

Does it cover Civil Liability Insurance?
A typical PLI does not cover criminal prosecution or civil liability cases, including, but not limited to suits such as defamatory, contract violations, warranty breaches, IP (intellectual property) violation, cost of doing business, etc. Exceptions to this insurance coverage, for technology providers, made are for internet security, data breach, data loss/theft, etc. These sets of suits are generally covered separately or are covered by exclusive contracts for each of them.

Can it be customized?
Since each service business is unique with its own inherent risks and intricacy of service provided, PLI contracts are generally customized to the nature of the business. So a PLI for people in the medical business is different (called as malpractice insurance) from an errors and omissions contract for lawyers, financial service consultants, investment advisors and insurance agents. Any good insurance company will provide profession-specific PLIs.

Can I have a PLI only for a specific contract?
PLIs generally apply to the individual and are not specific to a particular contract. However if a particular contract expects you to have a PLI, Insurance companies can provide such coverage. Many government and corporate contracts expect consultants to have a fairly high-value PLI before they can bid for a contract. In such cases, Insurance companies will process the PLI on a need basis.

How do I get started?
Allied Brokers, a long entrenched and experienced provider of insurance coverage in the Bay area, is also a trusted name for personal insurance, business insurance and health insurance. All you need to do is to pick up the phone and call us today on the listed numbers and a senior advisor will talk to you in depth.