Professional Liability Insurance

Close up businessman using laptop, sitting at work desk
Close up businessman using laptop, sitting at work desk

When operating a business, mistakes happen. After all, business owners are human too. That’s why the right coverage is so important. Professional Liability insurance (which is also known as Errors & Omissions insurance) can help ensure you’re protected against claims of actual or alleged negligence that arise from providing professional services, like giving incorrect advice, an omission, or failing to deliver a service. This coverage includes damages and defense costs up to your policy limits, regardless of whether a mistake was made.

Who needs professional liability insurance?

If your business provides any sort of service, you could be held liable for any mistakes made. That’s why a wide range of professions should consider professional liability insurance. These could include:

  • Traditional professionals, like lawyers, notaries, insurance brokers, real estate agents, and travel agents
  • Miscellaneous service providers, like management consultants, construction project managers, market researchers, property managers, printers, graphic designers, and event planners
  • Media and technology companies, like advertising agencies, IT consultants, website designers, and software developers

When would professional liability insurance come into play?

Here are some examples of circumstances where you might find professional liability insurance extremely helpful:
While working for an organization, an IT consultant keeps a database containing personal information about the company’s employees on an unencrypted laptop for testing purposes. Unfortunately, the laptop is stolen out of the consultant’s car. The employees launch a class-action lawsuit against the consultant for jeopardizing their private information. Professional liability insurance could help with the associated legal costs.
While conducting maintenance on a customer website, a development company disables security elements to apply modifications. Once complete, the website is put back in service, but the security elements are left disabled, and secure sections of the website are accessible to the public. Three months later, the error is discovered, and the customer alleges damages resulting from the error, including lost customers due to bad publicity. Damage allegations could be pricy, but professional liability insurance may shoulder some of those costs.
As part of an extensive nationwide market research project for a client, a consultant prepares contact lists. One of the lists uses data from a source which is no longer accurate. The incomplete contact list delays the project and results in the consultant being unable to bill their client. By having E&O coverage, the consultant is able to claim the financial loss caused by their mistake.

Manage your risk with Northbridge

Risk is a part of life – risk management should be too. While it can be hard to make space for risk mitigation in your daily routine, it shouldn’t be ignored.

Risk management solutions can be both simple or more involved, and our Risk Services experts can help with it all. In fact, every commercial insurance policy we offer includes access to risk management expertise. 

Risk management tips to help prevent errors and omissions

Even if you have the right insurance coverage, preventing a loss is always better than recovering from one. That’s why risk management practices should be a central part of any business. We outline just a few techniques that businesses should consider.
Creating an intake form for any clients you take on can be a very useful tool. When putting that form together, consider the following:
  • What are the client’s instructions?
  • Are the new client’s goals reasonable and attainable?
  • What is the fee or billing structure?
  • Is your business adequately staffed to handle the project?
  • Did any potential red flags come up during the interview and information gathering stages?
When evaluating potential clients, it’s important to collect and review as much information as possible. Things to consider include:
  • Does the client have a reputation for managing successful long-term relationships with vendors?
  • What reasons does the client give for changing suppliers?
A contract should lay out the responsibilities expected from your organization, as well as those expected from your client. In a working agreement or contract, you may wish to include elements such as:
  • Proper identification
  • Scope of work
  • Fee structure

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