Anyone who is in the business of giving advice or recommendations, or generating programs or products to customers, is going to need liability coverage. This is over and above the protections that a business entity such as a limited liability company would afford. Professional liability insurance and errors and omissions insurance are sometimes spoken of in the same breath and may even be considered synonymous by some insurance companies. However you name them, E&O and/or professional liability are designed to protect you from the slings and arrows resulting from personal mistakes made during the course of your career.
Time was, there used to be a distinction between professional liability insurance and errors and omissions insurance, says insurance educational periodical Insurance Buyer’s News. At one time, the insurance that professionals such as doctors and lawyers obtained for liability incurred while performing their services was called “professional liability,” whereas insurance for liabilities encountered in other semi-professional occupations was called “errors and omissions” insurance. The two have since converged to mean essentially the same type of insurance covering third-party grievances that do not involve bodily or property damage — the latter being covered by general liability insurance.
Birds of a Feather
Although the two terms are used interchangeably, there are some technical differences between professional liability and E&O. Professional liability insurance can be seen as a larger framework of which errors and omissions insurance is a part. As insurance provider Professional Liability Insurance Group notes, several different types of insurance fall under the professional liability rubric. Errors and omissions is one example, protecting people from things they did — errors — and things they didn’t do — omissions. Other types of professional liability insurance include directors and officers liability insurance and employment practices liability insurance, which covers sexual harassment and discrimination within the company itself.
One of the distinguishing traits of professional liability and/or errors and omissions insurance is that it covers the realm of intellectual rather than physical damages. Any lawsuits stemming from negligence on your company’s part that resulted in financial damage to a customer, for instance, would be covered under PL/E&O. Professional liability helps cover the cost to defend yourself, which could otherwise wipe out your business. Another aspect of PL/E&O is that policies are often “claims made,” meaning that they cover claims filed during the policy, as opposed to “occurrence” policies covering incidents taking place during that period.
If you obtain your PL/E&O coverage through a trade association or other professional group, you may be able to get professional liability insurance that is tailored to the specific needs of your particular profession. In that vein, professional liability designed for accountants would offer protection for acting as a trustee or administrator of an estate, while a policy for tech professionals might include provisions protecting against lawsuits arising from compromised data. Real estate agents, interior designers and pest control companies would each have specific clauses in their professional liability policies addressing their own specific needs.