Learn how insurance can help you recover if you make a professional mistake.
If you find yourself embroiled in a legal dispute with a client, professional liability insurance could be a financial lifeline. If your insurer approves your professional liability claims, it could help pay for attorney fees, settlements and court judgments that otherwise would be on your dime.
For small business owners with professional liability insurance, you can get help in the event a client seeks compensation in a lawsuit.
Jump ahead to learn:
What types of professional mistakes are usually covered? Some possibilities include:
Professional liability insurance can help shield you from the costs of civil litigation. If you make a mistake or forget to do something important at work — and your client sues you for it — your insurance could help cover your legal costs.
A professional liability insurance claim could help cover the financial losses of:
Professional liability coverage can help preserve your assets and your ability to keep working.
Unhappy customers might post nasty online reviews or even threaten to sue you. If threats turn serious, let your insurer know as soon as possible and determine if it’s necessary to open a professional liability claim.
If your customer actually sues you, your insurer will begin the claim adjudication process.
Some important points to remember about professional liability claims:
These four examples of professional liability insurance claims are among the most common we see at NEXT:
You mistakenly designate a real estate investment client as a C-corporation rather than a limited partnership. This results in greater federal tax liability for your client, who must pay corporate taxes on property income in addition to personal taxes on dividends received.
The client isn’t happy and files a lawsuit to recover the unnecessary taxes paid.
If you have professional liability insurance, your policy can help to pay for your legal expenses to resolve the dispute.
As a new architect, you don’t have administrative support or an architectural assistant to handle low-level design work but you agree to an aggressive deadline anyway.
As a result, you rush your work and make several design mistakes for a new apartment complex. You fail to specify several mechanical elements such as exhaust fans and access panels, and you omit life-safety components and plumbing piping, valves and drains.
Your professional mistakes require construction change orders and throw the project off schedule — and result in a financial loss for the building developer. Hello, lawsuit!
Your professional liability insurance can help reduce the legal costs you now face and help provide the funds the developer needs to keep the project moving forward.
You’re on assignment for a large manufacturer, and your job is to increase operational efficiency and reduce staffing to increase profitability.
You develop a new organizational design and supply chain workflow. But suppliers change, revise their capabilities and throw the new manufacturing process — and staffing changes — out of whack. And you did not have a plan in place for these changes.
As a result, output tanks, and orders back up. Rather than increase profitability, your plan causes your client to lose sales and post weaker margins. To make up for these losses, the company decides to take you to court.
If you have professional liability insurance, you might not have to pay for settlements or judgments out of your own pocket.
You show a home to a couple and they ask you to submit an offer. The property is older so you suggest they have it inspected and tested for radon. They refuse, saying they don’t want to risk having someone else buy their dream home. And you fail to get a signed waiver confirming they declined an inspection.
The offer is accepted and the deal closes. After the couple moves in, they order a home inspection and they learn their dream house has termites. Then they threaten to sue you.
Your professional liability insurance can help you deal with the financial aftermath of this tense client experience. But only if you bought a policy before the incident.
NEXT helps small businesses in 1,300 professions get just the right insurance coverage they need. We make professional liability insurance easy with 24/7 access to your policy via web and app to help you manage your coverage.
Start a quote, customize your options and access your certificate of insurance online — all in about 10 minutes.
