By Nick D’Onofrio, Associate Advisor 
Whether you own a large or small business, you face liability risks, and there are two types of policies you need to consider. General Liability insurance provides coverage for a broad range of claims related to bodily injury, property damage, and advertising injury. It’s a third-party coverage that provides protection for accidents and injuries on your business premises or because of your business operations. But if you own a business that offers services or consultations, you may want to consider adding Professional Liability insurance. This type of coverage focuses on issues such as causing financial loss to a client, failure to perform a service as promised, and errors or omissions in the service or product sold by the business.
So, who needs Professional Liability? Short answer—an increasing number of businesses. To stay competitive in today’s markets, businesses have shifted their focus to provide more service-oriented products. Professional Liability specifically covers businesses that perform consulting work, training, or work requiring special licensing or certification.
Many people believe that this type of coverage is only suitable for professionals like doctors or lawyers, while others simply choose not to buy it, mistakenly believing their General Liability policy will cover their professional service risks. However, many service-based businesses face professional risks. For example, manufacturers are prone to liability claims for using the wrong materials; engineers and architects are liable for flawed blueprints and designs.
Here are illustrative examples of businesses that could face a potential Professional Liability claim:
- A wedding planner who runs out of food halfway through a reception.
- A retirement advisor whose consultation causes the client to lose 10% of their life’s savings.
- A nutritionist whose program fails to help a client lose weight as implied.
- A real estate agent who provides incorrect information about a listing.
Along with providing legal expenses, Professional Liability also offers reputation protection and crisis management coverage. Even when a business is not found liable, the accusations can still damage a business’s reputation. Professional Liability insurance will help cover the cost of hiring a public relations firm or a reputation management service. As with all insurance, there are limitations to the coverage.
Professional Liability does not cover the following:
- lawsuits initiated by the policy holder
- expenses associated with fixing the problem
- Criminal Offenses if you knowingly committed a criminal act
Businesses that offer services or advice should consider this type of policy as an investment, especially given the current litigious environment. A Professional Liability claim could produce potentially irrevocable damage to a business.
