As a small business owner, you do your best to satisfy your clients and to excel in your field of practice. Whether you're a contractor building homes, a yoga teacher helping people achieve mind-body balance or an event planner organizing the most important days of your client's lives, you make every effort to ensure that everything goes to plan.
The thing is, we are all human, and humans sometimes make mistakes. Even the most skilled professionals in your field slip up every now and then, and especially when those mistakes affect their clients physically, financially or emotionally, they find themselves facing a hefty price.
No matter how careful you are, there's no way you can completely prevent the possibility that you'll make a professional mistake. Fortunately, there is a way you can protect yourself from the costs associated with mistakes you might make that could affect your business--and ensure that your clients will be taken care of if they are negatively affected, too.
What Is Professional Liability Insurance?
Professional liability insurance is a type of insurance that can protect your business in the unlikely event that you make some kind of professional mistake. It comes as an addition to your basic general liability insurance policy.
Let's say, for example, that you're a caterer providing food for a birthday party. When you spoke to the client on the phone, she mentioned that she has a walnut allergy, but you misheard her and wrote down "peanut allergy" in your notes. You went to great pains to make sure there are no traces of peanuts in the food, but there are walnuts in the brownies, and as soon as your client bit into one she had a severe allergic reaction and had to leave the party in an ambulance. Not a pleasant situation, and a completely honest mistake! Still, the client needs to cover her medical bills, and if you hadn't misheard her, her special night wouldn't have been ruined. This is a situation where professional liability insurance would come in handy. Insurance could cover her medical bills and compensate her, and you'd be free to continue growing your business.
Or maybe you're a professional painter, and you were hired for a major paint job for a whole office building. When the client comes to inspect your work, she points out that you used the wrong color of paint! Now the whole job needs to be redone! In a case like this, too, professional liability insurance can come to the rescue and help pay for the new paint job.
Is Professional Liability the Same as Errors and Omissions (E&O)?
The term "professional liability" refers to the general legal responsibility of a professional or service provider to compensate their client for any damages the client has experienced as a result of a mistake. Errors and omissions are the types of mistakes that count in this situation. An error is an active mistake--something you did that you shouldn't have done--and an omission is a passive mistake: something you should have done that you didn't do.
So for example, an error might be choosing the wrong product--maybe a type of shampoo that damages your client's hair, if you're a hair stylist, or a cleaning product that's too strong and strips the paint off the wall, if you're a cleaning professional. Or, if you're a personal trainer, it might be pushing your client beyond his limits and causing injury.
An example of an omission, by contrast, might be if you are a tutor and forgot to address a segment of the material you should have covered with your student, causing her to fail the test you were helping prepare her for. Or, if you're a plumber who was fixing some piping, and failed to notice a leak that ended up causing damage to the flooring.
So Is Professional Liability Insurance the Same as E&O Insurance?
Is E&O insurance the same as professional liability insurance? Effectively, yes. Even if the term "professional liability" is broader than "errors and omissions," the names for these business insurance policies are basically interchangeable.
Is Professional Liability Insurance the Same as Malpractice Insurance?
You may have heard of a type of insurance called "medical malpractice." Malpractice is simply the term used to describe professional liability insurance in the field of medicine. This type of insurance is designed to address the far higher costs of slip-ups in the medical field. While some of the examples above may cause distress or financial damage, the negative consequences of making the wrong call as a doctor can have severe and lifelong implications, so medical malpractice insurance must address that.
If There's No Real Difference Between Professional Liability and E&O, Why Do All These Terms Exist?
Is there ever a difference between errors and omissions and professional liability insurance or malpractice insurance?
The only possible difference is that certain terms may be favored over the others in different industries. As mentioned, "malpractice insurance" is most commonly used in the field of medicine; it also tends to be used in the legal professions. "Errors and omissions," by contrast, is more common in accounting, real estate and technical professions, while "professional liability" is most often found describing policies for architects and engineers.
Those aren't hard-and-fast rules, though, and it doesn't really make a difference what your policy is called. "Is professional liability the same as errors and omissions?" isn't really the right question to be asking; what's really important is to determine what kind of service the insurance policy offers. Does the policy address the most common issues professionals in your field tend to encounter? Does it offer all the services you might need when you have to make a claim? Is the premium affordable and practical for your business? How easy is it to make a claim? Does the insurance company offering you the policy have experience with other professionals in your field, and if so, what are those clients saying about them? Those questions are far more essential at the end of the day.
To learn more about professional liability insurance and how it can help protect your business, check out our Professional Liability Insurance page.