Shielding Professionals From Claims Made Against Them By Their Clientele

There has been a rise in consumer awareness. Courts are more consumer friendly now and patients have sued hospitals and doctors malpractice or negligence and the courts have been asking doctors and hospitals to pay for their mistakes.

- Jagendra Kumar

If a professional is alleged to have provided inadequate advice, services or designs to a client, professional indemnity insurance provides cover for the legal costs and expenses in defending the claim, as well as compensation payable to their client to rectify the mistake. Professional liability insurance (PLI), also called professional indemnity insurance (PII) but more commonly known in the US as errors & omissions (E&O), is a form of liability insurance which helps protect professional advice and service providing individuals and companies from bearing the full cost of defending against a negligence claim made by a client, and damages awarded in such a civil lawsuit.

The coverage focuses on alleged failure to perform on the part of, financial loss caused by, and error or omission in the service or product sold by the policyholder. These are causes for legal action that would not be covered by a more general liability insurance policy which addresses more direct forms of harm. Professional liability insurance may take on different forms and names depending on the profession, especially medical and legal, and is sometimes required under contract by other businesses that are the beneficiaries of the advice or service.

Professional liability insurance policies are generally set up based on a claims made basis, meaning that the policy only covers claims made during the policy period. More specifically a typical policy will provide indemnity to the insured against loss arising from any claim or claims made during the policy period by reason of any covered error, omission or negligent act committed in the conduct of the insured's professional business during the policy period. Claims which may relate to incidents occurring before the coverage may also be covered, means claims made during the policy period but which relate to an incident after the retroactive date.