Professional liability insurance, also known as errors and omissions (E&O) insurance, is a type of insurance coverage that helps protect professionals from financial losses resulting from claims of negligence, errors, or omissions in the services they provide. This insurance is designed to cover legal expenses, court costs, and settlements or judgments that may arise from lawsuits filed by clients who allege that the professional’s work or advice caused them financial harm. Professional liability insurance is commonly purchased by professionals such as doctors, lawyers, architects, engineers, and consultants to safeguard their assets and reputation in case of professional negligence claims.
Professional liability insurance typically covers the following aspects:
- Legal defense costs: Professional liability insurance helps cover the costs associated with defending against claims of professional negligence, errors, or omissions. This includes attorney fees, court costs, and other legal expenses.
- Settlements and judgments: If a client sues a professional for alleged errors or negligence, professional liability insurance can cover the costs of settlements or court-ordered judgments, up to the policy limits.
- Damages: The insurance may cover damages awarded to clients who have suffered financial losses due to the professional’s mistakes, errors, or omissions in providing services.
- Breach of contract: Professional liability insurance may also provide coverage for claims related to breach of contract, such as failure to deliver services as promised.
It’s important to note that the specific coverage and exclusions of a professional liability insurance policy can vary depending on the insurance provider and the terms of the policy. Professionals should carefully review their policy to understand what is covered and ensure they have adequate protection for their specific line of work.