Professional Liability Insurance for Service Businesses

Business Insurance for Professional Liability

Professional Liability Insurance, commonly known as Errors and Omissions or E&O Insurance, protects businesses that provide professional services or advice. When clients claim your work contained errors, caused them financial harm, or failed to deliver promised results, this coverage handles legal defense costs and settlements. Unlike General Liability that covers bodily injury and property damage, Professional Liability specifically addresses claims about the quality and outcomes of your professional work.

Why Your Business Needs This

• A client claims your advice or service caused them financial loss
• Someone alleges you made an error in your professional work
• A customer says you failed to deliver services as promised in your contract
• Claims of negligence or omissions in your professional duties
• Legal defense costs from lawsuits, even when you've done nothing wrong

What It Covers

Professional Liability Insurance covers claims alleging professional negligence or failure to perform professional duties. It pays for legal defense costs, which can be substantial even when you win the case. The policy covers settlements and judgments up to your policy limits if you're found liable. Coverage includes alleged errors, mistakes, and omissions in your work. If you miss deadlines or fail to deliver services as contracted, you're protected. The policy typically covers copyright infringement and misrepresentation claims related to your professional services.

Who Needs Professional Liability Coverage?

Any business that provides professional advice, consulting, or services should carry this insurance. Consultants, IT professionals, accountants, architects, engineers, and real estate agents need coverage. Marketing agencies, insurance agents, and financial advisors face significant exposure. Healthcare providers require medical malpractice insurance, a specialized form of Professional Liability. Even if you're a solo practitioner or small firm, one claim can devastate your business financially. Many clients require proof of Professional Liability before signing contracts.

Claims-Made Vs Occurrence Coverage

Professional Liability policies are typically written on a claims-made basis, which is different from most other business insurance. Claims-made coverage only responds to claims made during the active policy period, regardless of when the alleged error occurred. This means you need continuous coverage without gaps. If you cancel your policy, you may need tail coverage to protect against future claims for past work. Understanding this structure is crucial—letting your policy lapse can leave you exposed to claims even after you've stopped working.

What's Typically Excluded?

Professional Liability doesn't cover intentional wrongdoing or fraud. Bodily injury and property damage require General Liability coverage instead. Employment practices claims need separate Employment Practices Liability Insurance. Cyber incidents like data breaches require Cyber Liability coverage. The policy won't cover criminal acts or violations of regulations and laws. Contractual liabilities beyond professional services may not be covered. Claims for unpaid wages or business debts aren't included. Review your policy carefully to understand specific exclusions relevant to your profession.