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You need professional liability insurance if your business provides a service to clients

Key takeaways:

  • Professional liability insurance, also known as errors and omissions insurance (E&O insurance) covers your business in case of a lawsuit from unintentional mistakes.
  • There are different types of liability insurance. A standard business liability policy only covers bodily injuries and their associated costs. It does not protect you against non-physical damage that can occur.
  • In addition to protecting you from mistakes, your E&O policy covers late deliveries, breaches of contract, and unfinished work. 
  • Professional liability coverage doesn’t protect intentionally negligent acts or data breaches. Having complete business coverage is important in our litigious society.

As a South Florida business owner, you likely have general liability insurance, which covers physical injuries a visitor to your business might sustain. Not all people suffer injuries that can be seen with the eye, however. This is why all entrepreneurs should take a close look at getting professional liability insurance. 

Professional liability insurance in Florida, also known as errors and omissions insurance (E&O insurance), protects your business against a variety of claims. This type of insurance is especially valuable to accountants, doctors, and lawyers, but every business has some risk exposure when it comes to misrepresentation or negligence complaints. In this blog post, we’ll explore what professional liability insurance covers, what it doesn’t, and why your business needs its protection.

What is covered by professional liability insurance in Florida?

As mentioned above, professional liability, or E&O insurance, protects against negligence claims. This policy is separate from any other business policy you might have. It doesn’t cover bodily injury or property damage, but it does cover financial losses suffered by a third party. One important thing to note when discussing and purchasing E&O insurance is that you should consider purchasing high limits for the policy because defense costs are often a large cost of any judgment or claim settlement.

Why do you need the protection of E&O insurance and what is covered?

You might ask if you need E&O coverage. Professionals, such as attorneys, accountants, and architects, certainly need it, but if you advertise your products or services or offer advice or consultations with clients such as marketing or graphic design workers, you need coverage. E&O insurance protects you in the event of:

  • A mistake or oversight. This can include advertised prices online or in a newspaper or other physical means of advertising. For example, if you own a retail store and you make a mistake by listing a $100 product for $10 and do not honor the $10 price, you could be sued for not honoring the advertised price. 
  • Professional negligence. Professional negligence can occur in the professional service industry between a worker or company and their client. Professional negligence concerns how either manage or mismanage their obligations to the client and an established contract. These types of lawsuits generally affect lawyers who give faulty legal advice, accountants who make mathematical errors, IT professionals who did not apply proper security which led to a data loss, and creative professionals who miss deadlines or fail to meet agreed-upon product specifications. 
  • Unfinished work and missed deadlines. Leaving work unfinished can lead to a lawsuit if it affects the client’s profitability. If you have an accounting business and fail to meet an IRS deadline and incur penalties, or are a graphic artist who delivers a critical project late, which means a big sale goes unadvertised, you could be sued.
  • Contract breach. No matter what business you are in, you could face a breach of contract lawsuit. If your client feels you have failed to fulfill your contract, whether the terms were partially violated or fully breached, you could find yourself in court.

Having E&O insurance is about preparing for the unexpected. Whether the above incidents happen intentionally or by accident, we are a litigious society, and it pays to be protected. Without professional liability insurance, the high cost of litigation could mean closing your doors in the case of a lawsuit, no matter how frivolous. However, professional liability insurance doesn’t protect your business against everything, which makes having a comprehensive business policy important.

What is not covered by professional liability insurance?

It’s important to note that professional liability insurance is just one type of liability insurance. It’s meant to protect your business against financial loss claims but does not cover bodily injury or property damage claims. The exceptions to this are policies for doctors, architects, and engineers. What is covered when and for whom can be complicated, so talk with your insurance agent. 

In addition, your E&O insurance will not protect you from employee lawsuits that allege wrongful termination or harassment in the workplace. Protection from those events requires a different type of liability policy, called employment practices liability insurance. This type of policy is specially designed to protect your business against litigation costs for employee-filed lawsuits. 

E&O insurance also doesn’t cover:

  • Intentional wrongdoing. Your client might be incredibly annoying, but any mistake or omission that can be proven to have been made purposefully is not covered.
  • Data breaches. While your E&O policy might cover, say, a lack of a security update by your IT consultancy, it won’t cover your company in the event of a data breach and its associated expenses. Talk to your agent about a cyber liability policy that will.
  • Employee injuries. Just like your professional liability policy won’t cover injuries suffered by someone visiting your premises, it will not cover employee injuries in the workplace. Discuss a workers’ compensation policy with your agent – after all, it’s required by Florida law

Whether your business is brick-and-mortar, online, or you run it out of your home, it’s important to protect your business from common risks. Mistakes are a fact of life, and, unfortunately, a simple unintentional error can not only mean hefty out-of-pocket costs but the loss of your business. Check your policies today and make sure you’re covered with professional liability in Florida.  

Protect your business from professional liability litigation losses with Avante

All it takes is one minor mistake to trigger a lawsuit you never saw coming. You could lose more than money – the cost of litigation can mean the loss of your business. 

At Avante, we’ll work with you to build the complete coverage you need with a deductible that works for you. Reach out to us today because you never know what tomorrow will bring. At Avante, we have your back. 

This blog and website are made available by the publisher for educational and informational purposes only. It is not to be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state.