Professional Liability Insurance Primer

by David Glaser

"To err is human, to forgive divine,” wrote Englishman Alexander Pope (1688-1744).

In today’s litigious environment, "To err is human, so you’d better have professional liability insurance,” might be more appropriate.

No one is perfect all the time. Whether you’re new to the management consultant business or you’re an experienced practitioner, mistakes can and do occur during the course of an engagement.

Whether a claim has merit or not, once a lawsuit is filed against you, you become caught up in the legal process. You will have to retain an attorney. With triple-digit hourly rates, legal fees can add up and start looking like mortgage payments.

Your best defense? A professional liability insurance policy.

At Aon, one of the things we’ve learned from our management consultant clients is that there is some confusion regarding how professional liability insurance works. Here is a quick primer to help you with the basics.

What’s the difference between professional liability and errors and omissions insurance?

Professional liability insurance, errors and omissions insurance, E&O insurance, and malpractice insurance are all different names for the same thing.

What does professional liability insurance do for me?

A professional liability claim is triggered when a client alleges that you were negligent or made an error on the job that caused them financial harm. For management consultants, this might involve:

• Missed deadlines
• Misrepresentation of facts
• Negligent handling of data
• Improper fact verification
• Breach of nondisclosure
• Employee theft and sale of trade secret

In the event of a covered claim, professional liability insurance can pay:

· Damages or settlements ruled against you, up to the policy limit

· Legal defense costs up to the limit of your policy

Does general liability insurance protect me from professional liability claims?

No. General liability insurance pays for bodily injury and property damage claims.

For instance, a client trips over a crack in your sidewalk, is injured and sues you for their ‘pain and suffering.’ Or while at your client’s office you accidentally damage their equipment.

The best way to pick up general liability coverage is through a Business Owners Policy (BOP). These specially priced package policies include general liability and property insurance, which can protect your business property against such damages as fire, theft and windstorm.

What does professional liability insurance cost?

Professional liability premiums depend on your location, limits of liability, deductible, size of your staff, annual revenues and historical claim experience. If you choose the IMC-endorsed policy through Aon, having your CMC certification could have a positive effect on your professional liability premium.

If you have questions about professional liability insurance or other business insurances, contact Aon Affinity. We can help tailor the right type of protection to your specific needs and use our industry contacts to secure you the best price.

David Glaser is a broker and account specialist at Affinity. He has his property & casualty and life & health licenses in all 50 states and is nearing completion of his Chartered Property Casualty Underwriter (CPCU) designation. For assistance call David at (215) 773-5324 or email him at david.glaser@aon.com.