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Professional liability insurance has many names. You can call it professional indemnity insurance, errors and omissions or malpractice insurance.  The name depends on the profession you are in.  For instance if you are a physician, hospital, clinic or healthcare provider you will call it malpractice insurance.  If you are in a non-medical profession such as an IT consultant, lawyer, accountant or insurance broker you would call it errors and omissions.  The name is unimportant but what is important is how and why professional liability insurance exists.

A profession is defined as an occupation requiring considerable training and specialized study.  Special education and ethical conduct usually accompany the duties of a professional and because of this professional liability addresses the liability that general liability misses. General liability is a great for bodily injury claims or property damage for professionals who provide advice or a service need protection from bearing the full cost of defending your legal liability.

In the business world there a several factors that influence the legal liability of professionals, the professional/client relationship, expectations regarding professional services, standard of care, legal environment such as laws/regulations, prior court decisions, and the litigious nature of society.  When you enter in to a contract with a client your legal liability is to meet those requirements. Professional liability is designed to handle claims of alleged failure to perform such as negligence, misrepresentation, violation of good faith and fair dealing, and inaccurate advice.

If you work leads to a financial loss for your client your business could be responsible for damages and court fees.  Professional liability coverage is focused to protect your business and the work you do. A client can allege that you failed to perform your part, made an error or omission in the service or product sold.  For example a software product fails to perform properly, it may directly cause financial losses which could potentially be attributed to the software developer’s misrepresentation of the product capabilities or a custom-designed product fails without causing damage to person or property other than to the subject product itself, the cost to redesign, repair or replace the failed product itself can fall on to the manufacturer..  These are potential cause for legal action and with professional liability insurance (errors and omission) you can protect your business.

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