What are the types of professional liability insurance available and for whom?
In the age of lawsuits, any real or perceived mistakes on the part of provider of professional services, can make even an unsuspected client changed his mind and brought the provider to court. Due to this reason, it is good for those who are in certain line of risky businesses, to be ahead of the game by paying premium for professional liability insurance. The benefits are so huge, and the most important thing is the confidence that the business owners and the clients can appreciate when negotiating any transactions.
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In the US, nearly a half of small-business owners were involved or at least threatened with lawsuits. The cost of litigation can easily achieve thousands of dollars in no time. Consider also the amount of time that a company needs to spend on the case before the settlement of a lawsuit. Going to and fro court, lawyer’s office and negotiations, all those can affect the business badly. The company that must face litigation can also suffer reputational damage, something that every company wish it never must go through. An article by Aliya Daya at Rogers Insurance delves into the Effors and Omissions (E&O) insurance which is among the most commonly claimed in the business world.
Errors and Omissions (E&O) liability coverage for service providers and consultancy business
Errors & Omissions Liability protects the business professional by shielding their assets and paying for defense and potentially onerous legal costs if a client makes a claim. It protects the professional’s clients by ensuring there will be adequate funds to pay for damages incurred if the professional’s services are deemed to be faulty.
We often associate the word “professional” with physicians, lawyers, accountants, engineers or other people who require extensive education and training to perform their duties, but you do not need to be a doctor or lawyer to have a professional liability exposure. Virtually any business that performs a service or provides professional advice to a client in exchange for financial compensation can be sued on the basis that it failed to meet its professional obligations. Read more here!
Based on the article, we can see how permeating the professional liability insurance can be because it is not limited to certain famous career such as doctors, lawyers and accountants. We cannot help to think that only certain types of professions might require this kind of insurance, because those professions are directly dealing with life and death situations such as in the medical and legal field, or involves huge sums of money such as in accountancy. But the truth is, any contract might involve oversight and errors, or some portions of the contract might not be able to be delivered as promised, and there could failure to perform according to industry standards. That is why Gabriella Messina stressed the difference between Errors and Omissions (E&O) insurance with malpractice insurance in POMS Association blog.
What is malpractice insurance and how did it differ from E&O
Professions That Require E&O Coverage
Many different job sectors require professional liability coverage under different names and forms. Errors and Omissions is used by financial brokers, professional consultants, and insurance agents, as well as accountants, engineers, and contractors. Contractors must also be surety bonded.
For doctors, dentists, and other medical practitioners, professional liability insurance is called malpractice insurance. States require that medical professionals have current malpractice coverage to work in hospitals and other medical facilities. Lawyers are also required to carry malpractice insurance to cover any real or perceived failure to render professional services. Read more here!
One case of medical malpractice involved an elderly woman who was overdosed 1,000 times the correct radioactive iodine needed for her treatment. After the overdose, she developed thyroid gland disorder and later lymphoma, a form of blood cancer. Although the case was finally settled out of court, but a negligence of this kind on the part of the doctor can lead to high litigation cost that requires medical doctors to be covered by malpractice insurance.
Not only doctors can buy this type of insurance, but also Traditional Chinese Medicine practitioners and hospitals. Some malpractice insurance covers also teaching hospital, children’s hospital, rehabilitation center, specialty hospital and hospital’s integrated delivery system.
So instead of E&O liability coverage, the insurance specially designed for medical field is called malpractice insurance. While for insurance brokers and contractor, there is another type of coverage called surety bond. Shire Lyon has more to say about this at Insurance News Net.
Surety bond for insurance brokers
First, you’ll need to decide on the surety bond agency you’d like to use. It’s a good idea to search reviews before choosing. You should know that a bonding agency usually doesn’t underwrite its own bonds. The agency is appointed by surety bond companies, which typically perform the underwriting.
It’s beneficial to find a bonding agency that is a managing general underwriter (MGU), who is responsible for underwriting and will educate you on surety bond claims. MGUs have faster approval processes and will act as your claims advocate should you ever have a claim.
Once you choose your agency, check to see if they sell insurance broker bonds, since not all agencies sell all bonds. Most agencies have online application forms, so you can probably complete this part of the process from the comfort of your couch. Read more here!
If you are an insurance broker, you need to be covered by surety bond to ensure that your customers will be protected in any events of misconduct. There are cases when the premium money paid by the customers did not reach the company at all, but was misappropriated by the broker. Therefore, the coverage is very important and becomes part of professional license requirement.
In the end, no matter in what field you are currently working, and what types of professional liability coverage is suitable for your professional field or businesses, having your lifetime career protected and covered is obviously the wisest action to take. It can boost your confidence knowing the money is there to face any risk of tedious litigation process or challenging court days.