Professional Liability

aka Errors and Omissions aka Malpractice

Covers legal liability for actions or inaction, other than bodily injury or property damage (which are covered by commercial general liability insurance). Sometimes written in conjunction with commercial general liability, but more often as a standalone policy. Written for professionals such as real estate brokers, attorneys, doctors, financial services professionals, consultants, architects and technology firms. Also written for boards of directors of nonprofit and for-profit organizations.

The coverage section is short and simple, e.g.

The Company will pay on behalf of the Insured all sums ... that the Insured shall become legally obligated to pay as Damages because of a Claim by reason of a Wrongful Act

There is no list of claims covered; in effect, there is only a list of claims not covered. Coverage is determined by the definitions, exclusions, and endorsements attached to the policy. Basically, any claim is covered if it results from a defined activity by a defined insured, is not excluded (or there is an exception to an exclusion), and is not excluded or limited by endorsement.

Professional liability policies are usually "claims made". Only claims presented during the policy period are covered. The wrongful act (action or inaction) must have occurred after the "retroactive date", which is usually the inception date of the original policy written with a particular company. This is why it is important to have uninterrupted coverage with the same company (although sometimes a competing company will offer a retro date to match that covered by the original policy). If coverage is terminated, it is usually possible to buy "tail" coverage for several years to cover claims which may take some time to develop after the policy terminates. The claim deductible is often called self insured retention (SIR), and may also apply to defense costs as well as the claim settlement.

There is no standard Professional Liability policy. There is no substitute for proposed insureds carefully reading the entire actual proposed policy in the context of their specific activity and looking for red flag language that only they are uniquely qualified to recognize. Areas of concern, like an unacceptable exclusion, can often be addressed by negotiation with the insurance company.