Professional Liability Insurance covers liability against negligent acts resulting from providing or failing to provide professional services. It is also known as Errors & omissions (E&O) insurance or medical malpractice in the health industry. Professionals are people who hold themselves out as having a special skill, knowledge or experience. Most people think of lawyers, doctors, accounts, architects, and engineers but can also include consultants, advertising agencies, printers, information technology specialists (software developers, web hosting companies, etc.) and many more individuals and professions. If your business provides a service for a fee, then you have a Professional Liability risk.

Why is Professional Liability Insurance so important?

If you do not have Professional Liability Insurance, the defence and settlement costs could bankrupt your company, or you personally, or significantly affect future operations.

What is the difference between CGL and Professional Liability?

Commercial General Liability (CGL) covers bodily injury and property damage to third parties as a result of your negligence. A common example would be slips and falls. Professional Liability covers negligent acts or errors & omissions resulting from your failure to perform your professional services or duties. Losses to your clients could be financial in nature or medical in the case of medical malpractice.

What is a retroactive date?

Many policies such as a Commercial General Liability look at losses on an Occurrence Basis. If a claim is brought against you for something that happened years ago, your policy at the time of the occurrence will respond to the loss. A Professional Liability policy is on a Claims Made basis. Claims made before a certain date are not covered. The policy covers claims that are reported during the current policy period, even if the claim happened in the past. However, there are two criteria that need to be met in order for the insurance company to respond to the claim. First, you must have a Professional Liability policy in force at the time a claim is made. Second, you must have had continuous Professional Liability insurance coverage from the time of the incident to the time the claim is reported. The starting date of your continuous coverage is called the retroactive date which is the earliest date an event would be covered.

A more detailed explanation can be found on our blog article titled Professional Liability Insurance – Beware of a Lapse in Coverage

What is covered under a Professional Liability policy?

There are no standard policy wordings for Professional Liability Insurance. A doctor has different exposures from an accountant who has different exposures from a computer programmer. Most policies will cover judgements, settlements and defence costs as a result of your professional negligence resulting from one or more of the following:

• Breach of contract
• Breach of confidentiality
• Conflict of interest
• Medical malpractice
• Misunderstandings
• Missed deadlines
• Misconduct
• Failure to deliver services
• Financial damages due to oversight
• Defamation, libel, slander, product or character disparagement
• Infringement of intellectual property rights
• Errors and omissions

Professional Liability Insurance Claims Examples

Here are some examples of the types of losses that would be covered under a Professional Liability policy.

• An accounting firm is sued when a client’s taxes are reassessed by Revenue Canada. The client alleges failure to identify errors and provide proper tax planning.
• An employee is fired and sues the employer for wrongful dismissal. The employer then sues the placement agency for failing to do a proper background check on a candidate after discovering the resume was made up.
• A company is sued for breach of confidentiality when a client’s private information is accidentally sent to a third party and used to steal the client’s identity.

Trisura Guarantee Insurance Comany – A Focus on Professional Liability Claims
engineerscanada – Examples of Secondary Professional Liability Insurance Claims
Liberty Mutual Canada – Architects & Engineers Claim Examples

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