What is Professional Liability insurance?
A policy designed to provide coverage for defense costs and damages due to claims of damage or injury arising out of the negligent performance of services (errors and omissions), the breach of the ‘standard of care’.
What is the ‘standard of care’?
By tort law, a person, such as a design professional, is held to a standard of care, which is the skill and care ordinarily used by others in the same profession under similar circumstances in the same locality. The law does not hold these professionals to a standard of ‘perfection’, only to reasonable skill and care.
If a professional breaches that ‘standard of care’ then they are ‘negligent’ in the performance of their professional services.
What are ‘damages’?
The insurance policy defines damages as the amount of money for which you may be legally liable due to your negligent performance of services.
Who is covered by this insurance?
The professional liability insurance policy is intended to cover those providing professional services such as architects, engineers, consultants, construction managers, surveyors, or scientists.
Can I name my client as an Additional Insured on my Professional Liability policy?
No, this may be acceptable for General Liability insurance but not for Professional Liability. Your client is probably not performing any professional services on your behalf and this insurance policy is intended to pay on behalf of those providing professional services.
In addition, if your client was named as an Additional Insured on the insurance policy they would not be able to collect damages since an Insured can not make a claim against itself.
Why is the Contractual Liability a limited coverage?
Contractual Liability coverage under this insurance policy is limited to the extent that the professional would be liable for damages in the absence of the contract language. If the contractual liability requirement goes beyond what the policy covers, the firm would be put in the position of assuming a risk that is uninsurable.
What is a pre-claim?
Several carriers provide pre-claims assistance on Professional Liability. A pre-claim is a potential situation that could develop into a claim. Carriers provide assistance, without cost to the insured, to mitigate a situation before it develops into a claim.