Many businesses assume their general liability insurance covers most of their exposures. However, there are a number of situations that are excluded by general liability policies— professional liability being one of the main areas not covered.
Is your business susceptible to professional liability exposures? Typically, businesses that provide professional advice are well aware that professional liability, sometimes referred to as Errors and Omissions coverage (E & O), is an important piece of their liability protection. Business owners that commonly carry E & O policies are engineers, architects, lawyers, financial advisors, insurance agents, consultants and medical professionals. But really any business that provides a service probably has some exposure to E & O issues. For example, if a newlywed couple has a problem with their wedding planner’s execution on their special day, they could potentially sue the planner for thousands of dollars. The wedding planner would need professional liability insurance to get coverage from their policy.
To help understand the difference between general liability and professional liability policies, consider this example: Our office insures a small business that utilizes ground penetrating radar (GPR) equipment to locate underground structures. General contractors often hire the GPR contractor to check for underground gas lines before any digging occurs. Our GPR client has general liability, which will help if they cause damage while they are working. But what happens if our GPR contractor misses an underground pipe, which is later broken by the general contractor, causing significant property damage and injury? Our GPR business did not actually damage anything, but their “error” of missing the underground pipe played a big factor in the subsequent damage. Fortunately, our GPR contractor carries professional liability coverage to address this potential problem.
The construction industry can be of particular concern when it comes to E & O issues. Contractors typically carry general liability to insure against bodily injury and property damage lawsuits. But a common exposure not covered on general liability policies is “your work”. In other words, if a contractor has a difficult time installing a product and is sued by the client because of faulty installation, general liability coverage will be of no help. The solution would be for the contractor to add an E & O endorsement to their general liability policy that addresses issues with faulty design, installation and defective products. Depending on the size of the contractor, the endorsement may be as inexpensive as $250 a year. Larger contractors may need to purchase a separate E&O policy, with premiums usually in the $2,500 – $5,000 a year range.
So do you need Professional Liability coverage? For more information on how professional liability may relate to your business, call G. Suggs Insurance at 919-875-8889, or contact us by email at Greg@gsuggsins.com.
