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You can be an expert in your field and the best business owner out there, but you may still make mistakes — because you're human. Negligence doesn't always mean that you've made a huge mistake (though that can be the case). Sometimes it means that you've slipped up, and if you do, Simply Business can help keep you protected with professional liability coverage.
Whether you’re an architect or a photographer, our coverage can be tailored to your business’s exact needs.
We'll help you find the policy and quote that work best for you. It takes less than 10 minutes to answer a short series of questions before we present you with great choices for your business.
Plus, it can all be done online, making it easy and convenient for you to get coverage.
This insurance provides coverage if your client claims that your professional services resulted in negligence. If your customer sues your business for mistakes related to your services, your PL policy may cover any damages and legal costs that you might be ordered to pay as a result of that negligence.
And regardless of whether or not you make mistakes, there's a good chance you'll get sued; 90% of businesses end up with a court case at some point in their life span. That's a pretty big percentage, right? Not all of these businesses are making mistakes. A customer doesn't need a good reason to sue you. You could deliver what in your mind is your best work, but they still find an issue.
Take a look at this example: Say you’re an IT consultant. The software you suggested and downloaded for a client caused their computer to crash, and they lost their documents the day before a presentation at work. They ended up losing potential business without their presentation and decided to sue for the cost of lost business they may have had with that client.
Now, is it your fault that the client didn't back up their work? Can you determine that not giving the presentation was the reason for their losing business? Regardless of how you answered those questions, you'll still need to pay for legal services to settle the matter. In cases like these, professional liability coverage can help to pay the cost of your lawyer, and should a court decide you owe the client money, it also can cover the payment you're ordered to pay.
You may need professional liability coverage if you’re in the business of giving advice or providing a service. Maybe you own a shop where people come for services, like a beauty salon or tutoring center, or perhaps you work from home and provide bookkeeping services or graphic design for clients.
All of these businesses would benefit from professional liability, should something go wrong. And let’s be real — no matter how diligent we are, things do happen.
For example, if you’re a tax accountant and you accidentally place the decimal point incorrectly on a Form W-2. Years later, the client gets audited by the IRS and decides to sue you for your error. This coverage can protect you and cover your legal fees.
Maybe you provide medical billing services but use the incorrect codes that don’t correlate with the patient’s medical condition on their insurance and they’re billed far more than they should have been. Here’s another case where a professional liability policy could protect you.
Here are some examples of trades that would benefit from professional liability coverage:
If you’re curious as to why you haven’t heard of this kind of insurance before, it’s because depending on your profession, it can be called by another name (e.g., malpractice coverage if you’re a medical or legal professional). Professional liability covers your business under a general umbrella, but if you're looking for more specialized coverage, we suggest you also look into getting errors and omissions (E&O) insurance.
It’s a good idea to have professional liability coverage if you want to land larger projects or government contracts, but that doesn’t mean you shouldn’t protect smaller-scale projects. Your policy can cover you against claims of negligence from your professional services, whether it actually happened or not.
It’s a good idea to have the coverage, even if your state doesn’t require it. In the worst-case scenario, you’ll be covered and protected from claims that could be catastrophic. In the best-case scenario, you'll never need to use it.
The good news is that general liability insurance will cover a lot of what professional liability does not.
Let’s look at a couple examples of how professional liability coverage works: A real estate agent is showing clients a home in a historic neighborhood. The real estate agent forgets to mention that the basement is prone to flooding, especially during the winter months. The new homeowners are furious to learn about the potential flooding problem after buying the home, so they decide to sue the agent, claiming negligence.
The real estate agent’s PL policy can cover the costs associated with the lawsuit. The only out-of-pocket expense the real estate agent has is the policy’s deductible.
Say the homeowners didn’t sue the real estate agent until a few years after they bought the house. Regardless of whether the agent had coverage at the time the house was sold, as long as they have a professional liability policy when they are sued, the coverage will protect them. This type of coverage can really come in handy if your business is penalized for mistakes you made before your policy was in place.
Or maybe you work as a wedding photographer and are hired to shoot an outdoor wedding. You have a great relationship with the bride and groom, but on the day of the wedding it rains. Despite your urging them to have a back-up plan, they reject the idea and when the rain comes, the couple doesn't want a lot of indoor photos. After the wedding, they decide to sue you, wishing they had more photos to remember their special day. You did nothing wrong and did a great job at the wedding, so the newlyweds may not have a case. But they're still suing you, meaning you'll incur legal bills. Professional liability can help you pay for your legal defense.
No, it is not required by law, but it’s strongly recommended for business owners who provide advice and services (such as accountants, lawyers, appraisers, etc.). There are clients and vendors who may require you to have a professional liability policy before they agree to hire you.This isn't a federal law but can still be legally required. If a client has to choose between an uninsured business and an insured business to complete a project, they're more likely to choose the company that's insured.
Having this type of coverage also can help you land larger projects with customers who want to feel assured that they’re protected in case something goes wrong, regardless of whether or not they're legally required to hire companies that are protected.
This coverage can provide essential protection in case the worst happens. It gives you the peace of mind you need to focus on your business, plus it can help customers feel more confident about working with you.
Negligence can happen, even when you think you’ve done everything right. Professional liability coverage means that if a client sues you for negligence, you, your business, and even your family’s finances won’t be affected by any resulting lawsuits and claims.
Your professional liability premiums are tax deductible. The IRS considers your policy premiums allowable business expenses, which are deductible. However, you should ask for advice from a tax preparer or an accountant if you want to learn more about deducting your premiums on your business’s income taxes.
Your business’s payroll can definitely play a role in how much you pay for professional liability coverage. Think about it this way: The more employees you have, the greater the likelihood an incident of negligence might occur on your watch.
At the end of the day, it doesn’t always matter if it was you or an employee who made a mistake. What’s done is done.
The reality is that your business needs to move forward and continue working, which is hard to do if you’re saddled with legal fees. Being proactive and protecting yourself with professional liability coverage will keep your business’s finances safe so that you can continue to grow your business.
*Harborway Insurance policies are underwritten by Spinnaker Insurance Company and reinsured by Munich Re, an A+ (Superior) rated insurance carrier by AM Best. Harborway Insurance is a brand name of Harborway Insurance Agency, LLC, a licensed insurance producer in all 50 states and the District of Columbia. California license #6004217.