You provide a service to your clients in good faith. However, even if you are very careful to maintain a high level of service, errors or misinterpretation of your services can lead to client dissatisfaction. Whether you knowingly or unknowingly fail to meet the expectations and legal requirements of your profession, a client who suffers loss or feels they did not receive the services they paid for can take legal action against you. This is where professional liability insurance comes in. It protects you from situations where a client claims they suffered damages due to an error, omission or negligent act you made. Here we look at why you need professional liability insurance.
What is professional liability insurance?
Professional liability insurance, also known as errors and omissions insurance, offers protection for your business should a client suffer a loss or injury due to your services. When served with a lawsuit, your insurance covers the costs associated with legal fees as well as any damages you are expected to pay. This can include loss due to:
- Faulty performance
- Errors in your work
- Failing to meet expectations
- Misleading or incorrect advice
- Errors and omissions in your services
Even if your business has a Commercial General Liability policy it does not address issues related to professional services but instead property damage and bodily injury. Your professional liability insurance protects your assets and provides the funds required to cover damages allegedly caused by the services themselves.
What types of professionals need professional liability insurance?
In Ontario, there are some professionals who require different forms of professional liability insurance by law. By definition, these would be professionals requiring extensive, specific education to provide their services such as doctors and lawyers. However, professional services can include any business that offers a service as opposed to a product. This might include:
- Copywriters
- Photographers
- Graphic Designers
- Web Designers
- IT Consultants
- Management consultants
- Software Developers
- Architects & Engineers
- Medical Professionals
- Interior Designers
- Management Consultants
- Counsellors & Mediation Specialists
- Web Hosting Companies
- Advertising Agencies
- Wedding Planners
- Travel Agents
This covers a short list of the most common professions that could benefit from professional liability insurance.
How do I know if I need professional liability insurance?
There are a few things you might offer in your services that indicate you should invest in a professional liability policy:
When considering professional liability insurance, look at the nature of your services and how these scenarios apply to you.
- Date-Driven Services: If you work to deadlines, especially deadlines noted in a contract, you should probably have professional liability insurance. Clients who don’t receive their services in a timely manner could find a reason to sue due to losses experienced due to late delivery.
- Difficult Clients: If you tend to find clients are difficult in your industry such as design or creative services, this could lead to clients more likely to accuse you of failing to meet their expectations. This can be tricky to prove on both sides, so insurance is always a good idea.
- Your Work is Detail Oriented: If your work is highly detailed, and a missed or incorrect detail could cause issues for clients, you need insurance. This can be just about any professional from writers to engineers and consultants to planners.
- When Negligence has Serious Consequences: Any business that offers advice or a service where negligence can have serious consequences for a client needs professional liability insurance. This can lead to costly lawsuits that you are more likely to lose. From healthcare services to poorly planned interior design schemes, the more it would cost to correct a mistake, the more coverage you need.
When considering professional liability insurance, look at the nature of your services and how these scenarios apply to you.
What is covered by professional liability insurance?
Typical features of a professional liability policy include coverage for:
- Negligence
- Errors and omissions
- Misrepresentation
- Violation of good faith and fair dealing
- Inaccurate advice
- Libel/Slander against a client
- Loss of documents
Your coverage can be used to cover the costs of the following:
- Judgments and settlements against you
- Legal defence costs
- Disciplinary proceedings if they apply to your industry
- Loss of earnings during the trial and depositions
- Subpoena assistance
As you can see, your policy will avoid the costs of legal fees and the resulting damages coming from your personal funds.
Can’t I just hire a lawyer if I am sued?
Yes, you can take this route, but you are likely not prepared for the huge financial impact a lawyer and legal proceedings will have. Most people who opt for an Errors & Omissions policy benefit greatly from the legal defence in the event of a claim. This is extremely expensive and even if you are innocent there is no guarantee you will win your case. Without coverage, you have to pay not only the legal fees but any of the damages in the settlement against you. Most people are not prepared to cover such costs out of their own pockets.
What type of professional liability policy do I need?
Because your services are very specific to you, there is no one size fits all insurance solution. Although some brokers can find a standard policy for professionals such as doctors and lawyers, your specific profession will require a variation of standard policies based on your needs. You also want to consider the risks involved to make sure you get enough coverage for your policy. If you would like more information about the professional liability insurance Ottawa offers, call Oegema, Nicholson at (613) 704-7766 or contact us here.
