Professional Liability Insurance protects a company or individual from claims for which they are held responsible by third parties. Clients may hold them responsible for failure to perform an expected action as promised in a contract or for errors that result in loss. Legal defense costs are included in the coverage, whether there are any grounds for the allegations.
Any judgments resulting from the allegations will be paid for by the policy. The costs will include court costs up t the limits of the policy. The coverage extends to 1099 subcontractors and W2 employees. It may extend to the world and investors in particular would need this.
At one point or another, every company is likely to make a mistake. For this reason, Errors and Omissions (E&O) coverage was invented. Not only does E and O cover the professional, but also the employees or contractors that they hire. This type of policy is available for most industry groups or businesses.
Litigation for companies has become costly in the last several years due to service and product disputes. Customers sue more readily and the length and size of contracts may result in a larger jury award. Competition is stiff in the market and this result in pressure for suppliers to over-promise on their capabilities. Borders are constantly being crossed, which exposes companies to foreign laws and other regulations.
This type of insurance is particularly important to people in medical professions and engineering for instance. Other professionals that should consider this cover include professional translators who deal with technical or legal documents.
The policy should cover the firm or the person and not the interests of third parties or the clients of the firm. Claims will only be paid if the liability of the insured person has been established. It should cover all costs about legal defense in the event of a claim. Professional Liability Insurance covers claims made during of insurance, regardless of when the error, omission or negligent act took place.