Professional Liability Insurance
Coverage protecting professionals against claims of negligence, errors, or failure to perform professional duties owed to clients.
What It Is
Professional Liability Insurance protects individuals and businesses against claims arising from the performance of professional services—errors, omissions, negligent advice, misrepresentation, and failure to deliver services as promised. Unlike general liability which covers bodily injury and property damage, professional liability covers financial losses suffered by clients due to the professional's negligent acts, errors, or omissions.
Professional liability is typically written on a claims-made basis, meaning the policy in effect when the claim is made (not when the alleged error occurred) is the policy that responds. This is fundamentally different from occurrence-based coverage and creates unique considerations around retroactive dates, prior acts coverage, and tail coverage.
The coverage applies to a wide range of professions: architects, engineers, accountants, attorneys, consultants, technology companies, real estate agents, insurance agents, healthcare providers, and many others. Each profession has unique policy forms with specific coverage grants and exclusions tailored to the profession's typical exposures.
Why It Matters for Brokers
Professional liability is essential for any business that provides advice, designs, plans, or professional services to clients. The CGL specifically excludes professional liability claims, creating a complete coverage gap for professional errors. Brokers must identify professional exposures—which exist in many businesses that do not consider themselves 'professional'—and recommend appropriate coverage.
Real-World Example
An engineering firm designs a drainage system for a commercial development. A design error causes flooding that damages $850,000 in tenant property and results in $320,000 in business interruption losses for affected tenants. The total claim is $1.17M. The CGL denies the claim because it arises from professional services (the design). The engineering firm's $2M professional liability policy covers the full $1.17M in damages plus $185,000 in legal defense costs. Without professional liability, the firm would owe $1.17M out of pocket.
Common Mistakes
- 1Assuming the CGL covers claims arising from professional services—it specifically excludes professional liability, creating a complete gap.
- 2Not identifying professional exposures in businesses that do not consider themselves 'professional'—IT companies, consultants, and contractors who provide design services all have professional liability exposure.
- 3Failing to understand the claims-made coverage trigger and its implications for policy continuity, retroactive dates, and tail coverage needs.
How brokerageaudit.com Handles This
brokerageaudit.com's Submission Intake identifies professional service exposures based on business description, SIC/NAICS codes, and specific questions about the services provided. The Policy Checker verifies that professional liability coverage is in place for all accounts with identified professional exposures and checks that retroactive dates provide adequate prior acts protection.