Professional Liability Insurance, also known as Errors & Omissions (E&O) insurance, is designed to protect professionals and their businesses from claims arising from alleged negligence, mistakes, or failures to perform their professional duties. This insurance is particularly important for individuals and companies that provide specialized services or advice, as it covers legal defense costs and any resulting settlements or judgments.

Key Points:

1. Coverage: It typically covers negligence claims, misrepresentation, violation of good faith and fair dealing, and inaccurate advice. It does not cover intentional wrongdoing or illegal activities. Coverage includes legal defense costs, which can be substantial, even if the claim is found to be groundless.

2. Industries: E&O insurance is commonly purchased by professionals such as doctors, lawyers, consultants, architects, engineers, and real estate agents. It is essential for any profession that provides specialized advice or services.

3. Claims-Made Basis: Most Professional Liability policies are written on a claims-made basis, meaning the policy must be in effect both when the alleged incident occurred and when the claim is made.

4. Policy Limits: Policies have limits on the amount they will pay per claim and in aggregate over the policy period. Aggregate is the maximum amount an insurer will pay for all covered losses during a policy period, typically one year. It is crucial to choose appropriate limits that reflect the potential risks and exposures of the business.

5. Exclusions: Common exclusions include bodily injury, property damage, and intentional acts. These are typically covered under other policies, such as General Liability.

6. Importance: Professional Liability insurance is essential for protecting against the financial risks associated with the professional services you provide. It ensures that a single mistake or oversight doesn’t jeopardize a business’s financial stability.