Professional liability insurance is traditionally purchased by firms made up of architects and engineers, physicians, dentists, accountants and lawyers to protect against patients or clients alleging that negligence on the part of the professional caused physical injury or possibly economic loss to their clients.
“Over the last 20 years, the definition of professional services and the related duty of care owed by various consultants to their customers has broadened considerably,” says Philip Glick, a senior vice president with ECBM Insurance Brokers and Consultants. “As examples, real estate brokers, computer consultants and software engineers, insurance brokers, construction managers and contractors, and other miscellaneous types of consultants now are considered as professionals and face potential errors and omissions types of liability claims.”
Smart Business spoke with Glick about how professional liability insurance is changing and why you may need it.
Why doesn’t a general liability policy cover these types of claims?
General liability insurance is intended to cover claims arising out of bodily injury, or property damage arising from the client’s premises or related operations, including potential product liability losses. Similarly, a contractor’s general liability policy would cover potential claims based on completed operations such as construction of buildings or maintenance of facilities. General liability insurance does not cover economic loss suffered by a client due to an error or omission committed by a business, for example, if a client buys a new product, such as a high-speed printing press, and the press works but produces a lower hourly volume than expected.
Additionally, general liability insurance companies often exclude bodily injury claims arising from other types of professional services, such as pharmacists, health club operators, physicians and surgeons, architects and engineers and security guard companies. This exclusion mandates the need to buy separate professional liability coverage that will pick up both economic loss and bodily injury claims arising out of the designated professional’s products or services.
What is the solution to these gaps?
For firms traditionally recognized as professionals, the solution is to specifically purchase separate professional liability insurance in addition to commercial general liability insurance. For sports therapists, health clubs and sprinkler protection contractors, the simplest solution is to be sure that there is no specific professional services exclusion in their commercial general liability policies so bodily injury or property damage claims arising out of services will be covered. If there is also a potential exposure for pure economic losses to their customers, they will have to purchase a separate, stand-alone professional liability or errors and omissions policy.
