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Professional Liability

Part 1

Increasingly, professionals and certain occupations need special insurance protection as they are targeted by lawsuits due to the high standard of accountability under which they operate.

In most instances, a general or commercial general liability policy will protect a business against damage or injury their actions may cause to others. However, this type of policy is designed to handle loss associated with fairly generic and low-risk activities. Examples are customers who cut their hands on a sharp edge of an office's reception desk or a customer who is hurt when she collides with a clerk who is stocking a shelf. In other words, the protection has most to do with covering liability connected to losses that occur on the business premises.

As opposed to risks connected to a location, the liability faced by professionals are created precisely by the service they provide. Some professions that are prone to dealing with lawsuits include the following:

Accountants
Architects
Beauticians
Chefs
Dentists
Engineers
Lawyers
Media Services
Nurses and Physicians (especially medical specialties)
Public Servants
Publishers
Real Estate Agents

Reasons such persons are sued typically flow out of the following:

Malpractice
Breach of Contract
Confidentiality Breaches
Misleading Third Parties
Negligence
Failed Medical Procedures
Food Poisoning

Please see part two of this discussion on factors that drive the need for professional liability protection.

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Professional Liability

Part 2

Part one of this discussion revolved around occupations that are more vulnerable to lawsuits. The following are reasons why higher stakes exist with professional activities such as the following:

Expert Status–Persons who need professional liability coverage are those whom the general public depend upon as experts. They help with special issues such as personal health, expensive business transactions, or personal crises. Many of these situations also involve a high-level of emotion. When something goes wrong, it is much more likely that a client will pursue "justice" through the courts.

Reputation–Any claim a client makes against a professional involves that individual's reputation. In many instances, paying a claim bears the stigma of admitting to a mistake. The professional may suffer from a lowered status and could face sanctions from related professional associations or regulatory authorities. Further, many professionals are proud of their standing and their abilities; admitting being wrong is usually fiercely resisted.

Defense Costs–Defending against claims of professional error or incompetence is usually very expensive and time-consuming. Trials will generally involve expert testimony and technical arguments and the likelihood of resolving issues quickly (particularly via a settlement) is extremely low.

Identifying A Loss–The timing between when a loss occurs and when a claim or suit is filed can be a mystery. A professional may find out she's being sued today for something that happened ten years ago. The potential for a huge time gap before a loss arises makes professional liability a very difficult type of business to underwrite and to price.

You have invested a lot in your business and your profession. It is important to be sure that you take the steps to deal with the special as well as the routine sources of loss. As usual, it is always a good idea to discuss your questions and needs with an insurance professional.