Professional Liability (PL) insurance is an important part of a company’s risk management strategy, offering protection for professionals and businesses from claims of negligence in performing professional services or breach of duty in their services or advice. Brokers should understand the full scope of activities conducted by a professional or business to ensure they obtain the right cover for their unique risks.
What is a ‘professional’?
Over 25% of Canada’s 21.12 million-strong workforce[1] are classified as ‘professionals’, which includes occupations such as accountants, finance and investment professionals, software programmers and HR specialists, to name a few.
It’s a broad term, but ‘professional’ occupations usually differ from other categories in that:
- their income is usually derived from holding specialist qualifications or knowledge, and
- their occupation is governed by a code of ethics.[2]
What is Professional Liability insurance?
Professional Liability insurance can provide protection for businesses in professional fields if an allegation or claim is made against them for negligence or breach of duty. This may arise from an act, error, or omission in the performance of their professional service or advice.
“If, for instance, an engineer designs a bridge or walkway which collapses due to issues with the design, we could see claims from individuals unable to work due to their injuries, alongside property damage and the cost incurred to redesign and rebuild the bridge.” says Richard Williams, Underwriting Manager, Financial Lines, QBE Canada.
In this situation, Professional Liability insurance could protect the engineer and their business against these claims and help cover expenses associated with the incident.
Who needs Professional Liability insurance?
Occupations that may require PL insurance can be broadly divided into three categories:
- Professional services: for example, accountants, insurance brokers and PR consultants
- Design & construction services: for example, architects, engineers, contractors, surveyors, and real estate developers
- Personal services: for example, travel agents, fitness instructors and private investigators
Some businesses and professionals operating within emerging sectors may also require PL cover, including sustainability and ESG professionals, or those working in data analytics or digital marketing.
What does a Professional Liability insurance policy cover?
PL insurance generally covers claims across three major areas of exposure – statutory liability, negligent misstatement, and/or breach of duty.
Statutory liability
This is a legal term which broadly means that individuals or entities conducting a business must comply with the responsibilities and obligations imposed on them at law. If they fail to do so, they may be held legally accountable or liable for any violations or breaches of that law.
“In short, no law means no liability – so there must be a legal basis for a claim to be successful,” says Williams. “This is sometimes also known as third party liability.”
Negligent misstatement
This refers to a statement of fact, advice, or opinion made in a business context that is inaccurate or misleading.
“Underwriters must always ensure that there is nothing unclear or misleading in the exclusions or terms and conditions they provide in a quote,” says Williams.
Breach of duty of care
This relates to negligent or careless conduct, or a failure to act, by a person who owes a duty of care to another.
“An accountant who gives incomplete tax advice to a customer, failing to alert them to an issue or consequence that someone in their profession would be reasonably expected to know, would be one such example of a breach,” says Williams.
What are some key Professional Liability considerations for brokers?
There are many things to consider when assessing your customers’ needs to ensure they have the right level of coverage.
Named insured
PL policies will usually only cover the person(s) or entity specified in the schedule. It’s important to ensure the correct legal entity name is listed, not just a trading name.
Professional services
The policy should clearly state the profession conducted by the insured, in addition to any past services they have offered or new activities that they may consider introducing.
Retroactive claims
Under a PL policy where a retroactive date has been specified in the policy schedule, limited retroactive cover has been provided. This means that the insured is covered for conduct of the specified profession arising from acts, errors or commissions committed or alleged to be committed after the retroactive date. Unlimited retroactive cover is the preferred option in many circumstances.
Contractors and consultants
Consider how the business uses contractors and consultants and if they are covered by the policy. Some policies will cover contractors and consultants, others won’t – so it is important to check.
Geographical restrictions
Are there any restrictions based on the location of the work conducted? If the business has income from or operations domiciled overseas, ensure you understand on what basis the cover is provided.
Policy exclusions
Ensure you’re familiar with any exclusions and jurisdictional limits in the policy. For example, if your customer provides services that could result in a bodily injury, does the policy have an absolute bodily injury and property damage exclusion or does it contain a carve back in respect of the performance of professional services?
Professional Liability insurance and risk management
Managing risk is a key element of any business strategy, and insurance can act as a safety net should things go wrong.
The first step in developing a strong risk management plan for a business is understanding the potential challenges it may encounter. Brokers can assist by offering a risk analysis to pinpoint challenges and arrange appropriate coverage.
“Using a risk management framework should be a priority for customers – and is critical for business operations running smoothly. Building an effective risk management system enables customers to identify, assess and mitigate risks, while driving an ongoing commitment to improvement.” says Williams.
“Professional Liability cover is designed to act as a fail-safe mechanism to assist and protect your customers should an issue or problem occur unexpectedly.”
How can we help you?
QBE offers Professional Liability insurance for large and small businesses. Visit our Professional Liability / Errors and Omissions webpage to learn more and access contact information.
