Professional Liability Insurance Explained

Posted September 26th, 2018 by Jason Metz

Professional liability insurance is also known as errors and omission insurance. It protects your business against claims that your professional services caused a client harm due to your mistake (errors) or because you didn't perform a service (omission). This coverage is generally not included in a business owners policy (BOP insurance) but can be purchased separately or as an endorsement to your BOP.

Even if a lawsuit is groundless, professional liability insurance can cover the costs for:

  • Legal defense.
  • Settlements.
  • Judgments.

If your profession provides a service directly to customers, it's a good idea to consider professional liability insurance. Depending on the state, certain professions may be required to carry it. Professional liability insurance cost will depend on several factors, including:

  • The type of profession.
  • The number of employees.
  • Location.
  • How many years you've been in business.
  • If your business has a history of claims.


Professional liability insurance for nurses

Medical malpractice insurance is a specialized type of professional liability coverage. Nurses are often on the front lines of medical treatment can be sued for medical malpractice. About 41% of medical malpractice claims against nurse practitioners are diagnosis-related and 30% are treatment-related, according to a study by the U.S. National Library of Medicine of the National Institutes of Health.

Medical malpractice insurance can come in several forms, including:

  • An individual or group policy purchased through a private insurer.
  • An individual or group policy purchased through a risk retention group (RRG)—an organization of medical professionals to provide liability insurance.
  • Coverage through an employer, such as a hospital.

Professional liability insurance for lawyers

Four out of five attorneys will have at least one malpractice claim during their careers, according to the American Bar Association. Conflict of interest is the most common malpractice claim, according to a survey by Ames & Gough. Lawyers' professional liability insurance typically covers claims that are specific to the legal field, such as defamation and invasion of privacy claims.

Professional liability insurance for counselors and therapists

Professional liability claims for individually insured counselors cost an average of $176,860, according to Understanding Counselor Liability Risk, a report by the Healthcare Providers Service Organization. If you are a counselor, a client could say that your advice (or lack of advice) caused harm. Lawsuits can include breach of confidentiality, improper treatment, incorrect diagnosis, patient suicide, sexual impropriety, and slander or libel.

Professional liability insurance for consultants

Clients often rely upon a consultant's expertise to improve their business. Whether you're a financial consultant, IT consultant, social media or marketing consultant, or consult on any type of business, if a client believes your advice (or lack of advice) caused their business harm, they could sue. Your client might hold you responsible for financial damage, reputational damage or any number hardships.