Professional Liability Insurance

How to keep lawsuits and malpractice claims from ruining your business
By Gary Stern If you're a professional, such as a lawyer, accountant or architect, you're vulnerable to lawsuits. Defending yourself and your business in a lawsuit – even one that's a frivolous claim – can drain your finances, sap your time and possibly ruin your business.

To protect yourself and your company, professional liability coverage is extremely important. What you would pay for a monthly deductible is far less than the costs you'd face to defend a lawsuit. When shopping for professional liability insurance, consider:

1. If the policy covers legal fees and expenses in addition to damages.
2. If the policy's coverage limit will cover all of the potential fees and damages.
3. If you can afford the deductible.
4. Who's covered by the policy.
5. If the policy covers prior acts.
6. If the policy covers mental anguish or only tangible losses.
7. If the policy is on a claims-made basis (meaning that coverage applies to claims made during the policy period regardless of when the incident occurred).

 

Errors and omissions

If a customer holds you responsible for errors or for the failure of your services of products to perform as promised, errors and omissions insurance can protect your company. Coverage typically includes court costs in addition to any judgments against you. Remember that general liability polices won't cover error and omissions.
Try: The Hartford, Landy.com and CommerceOnline.com provide errors and omissions insurance in a wide variety of fields.

Employment practices liability

This form of liability insurance protects employers from claims made by employees, former employees and potential hires. Coverage includes claims, such as sexual harassment and wrongful termination. Coverage generally covers an entire firm, including its directors and officers.
Try: InsurePro, which specializes in professional liability insurance, offers employment practices liability insurance.

Directors and officers

Management can be sued as a result of their performance on the job. Errors and omissions policies don't cover directors and officers. A separate directors and officers liability insurance policy is often recommended to provide financial protection in the event of a lawsuit.
Try: Arden Financial Services specializes in professional liability insurance, including directors and officers policies. Find out what to look for in AllBusiness.com's checklist of issues to review for directors and officers insurance.

Group personal excess liability

This form of liability insurance can protect the personal assets of managers and key employees.
Try: For group personal excess liability insurance, go to InsurePro.com.

Tax and financial services

Professional liability insurance is available for tax and financial services providers, including those who perform tax return preparation, bookkeeping services, payroll processing services and financial planning.
Try: EZInsurance.com offers policies for tax and financial services providers.

Lawyers

The exposure to legal malpractice suits is higher than ever and small firms aren't exempt. At this time, all lawyers professional liability insurance is claims-made. Some policies offer "tail coverage", which means the policy is still in effect for a predetermined period of time after a law firm is dissolved, a lawyer retires or a policy has been canceled.
Try: American International Group, one of the largest insurers in the country, offers professional liability insurance in a number of fields, including the legal arena.

Architects and engineers

Similar to malpractice insurance, this variation of errors and omissions insurance is designed specifically for architects, engineers and other design professionals.
Try: Liability policies for architects and engineers are available from eInsure.com, along with plans for appraisers, insurance agents, insurance adjusters, real estate agents and lawyers.

Information technology

Computer consulting and IT services firms are also potential targets for lawsuits.
Try: TechInsurance.com offers liability policies for firms in the tech industry.

• Ask your broker exactly what each policy covers and which one is right for your specific business.
• Avoid having any gaps in your policy. Make sure your policies cover several contingencies such as what happens if an employee sues you for discrimination or if someone falls and gets injured in your office.
• Look for a broker who specializes in your industry.