The coverage focuses on alleged failure to perform on the part of, financial loss caused by, and error or omission in the service or product sold by the policyholder.
These are causes for legal action that would not be covered by a more general liability insurance policy which addresses more direct forms of harm.
Professional liability insurance may take on different forms and names depending on the profession, especially medical and legal, and is sometimes required under contract by other businesses that are the beneficiaries of the advice or service.
Coverage does not include criminal prosecution, nor a wide range of potential liabilities under civil law that are not enumerated in the policy, but which may be subject to other forms of insurance.
However, various professional services and products can give rise to legal claims without causing any of the specific types of harm covered by such policies.
Common claims that professional liability insurance covers are negligence, misrepresentation, violation of good faith, and inaccurate advice.
[2] Coverage does not include criminal prosecution, nor all forms of legal liability under civil law, only those specifically enumerated in the policy.
For example, a breach of duty may be included if the incident occurred and was reported by the policyholder to the insurer during the policy period.
Coverage is usually continued for as long as the policyholder provides covered services or products, plus the span of any applicable statute of limitations.
Canceling the policy before this time would in effect make it as if the insured never had coverage for any incidents since any client could bring any case with regard to any such services or products that occurred before the statute of limitations cut-off point.
Most policies will require the attorney or Insured to report any claim, alleged error, or facts that could give rise to a malpractice complaint as soon as they learn of the mistake.
While the cost of the policy is obviously the primary factor for many law firms, careful examination is necessary to ensure that a lower premium does not correlate to less coverage.
use the term errors and omissions (E&O) insurance Other professions that commonly purchase professional liability insurance include accounting, engineering, land surveying and financial services, construction and maintenance (general contractors, plumbers, etc., many of whom are also surety bonded), and transport.
This type of insurance is in fact pretty common all over the world, being considered the main risk management instrument both for individuals and companies.
Finaccord, one of the leading international market research and consulting companies, has estimated that in the first 10 countries (Austria, Belgium, France, Germany, Italy, the Netherlands, Poland, Spain, Switzerland and the United Kingdom) the total value of this branch will rise from 6.15 billion US dollars in 2009 to 7.5 billion dollars by the end of 2017.
[4] Errors and omissions (E&O) insurance, which may exclude negligent acts other than errors and omissions ("mistakes"), is most often used by consultants and brokers and agents of various sorts, including notaries public, real estate brokers, insurance agents themselves, appraisers, management consultants and information technology service providers (there are specific E&O policies for software developers, home inspectors, website developers, etc.
Several carriers[citation needed] who underwrite policies will not allow professionals to backdate their coverage to their expiration date without a valid explanation (such as, but not limited to: natural disaster or personal medical issue that prevented one from renewing on time) and a signed warranty letter informing the carrier the specific professional is not aware of any pending claims.
The typical tail extends the reporting period only for claims up to six months or one year after the policy expiration date.