Does Your Professional Liability Insurance Provide You With the Right Coverage?
It’s common wisdom that licensed professionals should carry liability insurance to protect them against malpractice lawsuits. However, dozens of insurers offer professional liability policies in California, and each insurer may offer multiple policy types at various price points. The sheer variety of offerings can make it difficult to understand whether you have the coverage you need to protect your career.
You’re not alone if you’ve ever wondered how professional liability insurance works. Below, we explain how these policies work, who needs them, and how to tell if you’re getting the coverage you need and the protection you pay for.
Professional Liability Coverage Explained
What is the purpose of professional liability insurance (PLI)? It is a specific type of liability insurance that protects licensed specialists from the serious financial consequences of malpractice claims.
This coverage is different from standard liability policies. General liability coverage applies to physical damage, such as personal injuries and property damage. For example, a slip-and-fall accident or damage to a customer’s car would fall under general liability.
In contrast, professional liability coverage, sometimes known as errors and omissions insurance, covers experts and service-based businesses from more abstract risks like giving a client inaccurate professional advice or violating best practices in a way that harms the client.
Professions Where Liability Insurance Matters
PLI coverage is not necessary in every industry. It’s most often beneficial for businesses, contractors, and consultants requiring specialized licenses. So, who needs professional liability insurance? Here are some of the most common professions where PLI matters:
- Healthcare: Doctors, nurses, and other medical professionals should carry professional liability insurance to protect against medical malpractice claims such as failure to treat or negligent care. Many healthcare workers are legally required to have PLI.
- Accounting and finance: Accountants and financial advisors benefit from PLI as protection against violation of fiduciary duty and fraud claims.
- Architecture and engineering: Engineers and architects should have PLI to protect them against allegations of mistakes during the planning and construction of their buildings.
- Real Estate: Agents and brokers should consider PLI to protect against claims they failed their fiduciary duty to their clients.
- Consulting: All consultants may need PLI if they are accused of breach of contract or failure to deliver.
What Should a Professional Liability Policy Cover?
The specific details of PLI policies will differ based on their industry. However, the basic protection provided by all liability policies is the same: the duty to indemnify. When you sign a contract for PLI, the insurer agrees to take on the duty to indemnify you against claims like the following:
- Mistakes and omissions: You have a professional duty to provide accurate advice and services to your clients. If you make an error or leave something out, PLI protects you against client claims.
- Negligence: Your industry likely has a set of professional standards you must meet in your practice. If you neglect to follow them and cause a client harm, your PLI policy covers the costs of the claim.
- Breach of contract: If you sign a contract in your role as a professional, you are obligated to fulfill its terms. If you cannot do so, or if you disagree about what the terms of the contract actually require, PLI will cover the cost of any breach of contract lawsuits filed against you.
- Missed deadlines or undelivered services: Whether or not you have a written contract, you must meet the deadlines you agree to with a client. Similarly, if you’re paid for services, you must deliver them. If you cannot do so, PLI protects you against any resulting lawsuits.
PLI policies also impart the duty to defend your insurer. Under California state law, insurers must protect you against any claim that may be covered by your policy, regardless of whether it has merit. In other words, if a client sues you for malpractice, but their allegations are obviously false, your insurer must still cover the costs of your defense. The same applies if you’re sued for alleged fraud, even if your policy only covers negligence.
Of course, every policy is different. The specific protections and exceptions in your contract will vary depending on your industry and insurer. Your insurance company should be willing to provide a clear explanation of the exact protections your policy offers.
What Happens If Your Insurer Refuses to Pay?
The duties to indemnify and defend are fundamental to liability insurance. If you’ve purchased professional liability coverage, your insurer is obligated to:
- Give you accurate information about what your policy covers
- Defend you against any claims that may fall under your coverage
- Attempt to settle claims against you that would exceed your policy limits
- Pay settlements and damages up to your policy limit
If the insurer fails to do any of these things, it is likely violating your contract.
Some insurers will argue that a given claim is not covered, despite what your contract may state. If your provider has refused to defend or indemnify you for something you believe should be covered, it’s in your best interest to speak to an experienced California insurance attorney.
The skilled lawyers at Oksenendler Law, P.C. are available to help. We have decades of experience representing clients whose insurers have failed to defend or indemnify them. We have successfully fought back against bad faith and contract violations committed by the biggest insurance companies in California.
If you think your insurer is not upholding the terms of your professional liability insurance policy, we can help. Schedule your consultation today to review your policy and discuss your next steps to get the full coverage to which your contract entitles you.
