WHAT IS PROFESSIONAL LIABILITY INSURANCE?

 

Professional Liability Insurance, also known as Errors & Omissions Liability Insurance or Malpractice Insurance, covers liability for the higher standard of care required of professionals when providing services in their area of expertise.  The higher standard of care required of professionals is that they must have the same expertise and competencies common to members in good-standing of their profession.

 

Traditionally professional liability was limited almost exclusively to the legal and medical professions, but starting in the 1960’s courts began to hold a much wider range of service providers to a professional standard of care.  Insurance companies responded to these new exposures by adding professional liability exclusions to General Liability and Directors & Officers Liability policies, and by developing separate Professional Liability policies on a variety of formats.

 

 

THE NEED FOR PROFESSIONAL LIABILITY

 

Today almost any class of service provider can be held to a professional standard of care.

 

For example, does a plumber need professional liability insurance? If a plumber were to accidentally flood your home you might feel entitled to compensation based on your expectation that a plumber, rather than being merely reasonable, should have knowledge and skills similar to other plumbers.  In other words you might feel entitled to hold the plumber to a professional standard of care.

 

Whether a particular service provider in a particular situation can be held to a professional standard of care is a legal question that can only be answered definitively in a court of law, but answering that question usually isn’t necessary for insurance purposes.

 

The relevant question for insurance purposes is –

Does your nonprofit provide services that are excluded under your General Liability and Directors & Officers Liability policies?

If the answer is ‘yes’ you probably need a Professional Liability policy. Plumbers don’t need professional liability insurance because plumbing services aren’t excluded under their General Liability policies.

 

 

SOME ADDITIONAL CONSIDERATIONS:

 

 

  • Regardless of policy exclusions, General Liability won’t cover 1) emotional distress unless arising from bodily injury 2) financial loss unless arising from bodily injury or property damage,   or 3) property damage to intangible property (such as information stored in a computer).  These exposures usually need to be covered under a Professional Liability policy.
     

  • Directors & Officers Liability can sometimes cover incidental Professional Liability (for example for volunteer accountants or lawyers), but policy exclusions need to be examined closely.
     

  • Never assume that because you have a Professional Liability policy you’re covered for all your professional exposures. There are a great many Professional Liability formats with varying levels of coverage. The scope of your policy and its exclusions must be compared with the services you provide.  As is the case for all coverages, seek the advice of your insurance agent or broker.

 

 

 

   EXAMPLES OF SERVICE PROVIDERS REQUIRING PROFESSIONAL LIABILITY

 

▪    Traditional and Alternative Healthcare Providers

 

▪    Social Workers

 

▪    Pastoral Counselors

 

▪    Career Counselors

 

▪    Mental Health Counselors

 

▪    Court Appointed Special Advocates

 

▪    School Teachers

 

▪    Lawyers

 

▪    Accountants

 

▪    Financial Consultants

 

▪    Computer Consultants

 

 

 

   NONPROFIT ORGANIZATIONS USUALLY NOT REQUIRING PROFESSIONAL LIABILITY

 

▪    Professional and Trade Associations

 

▪    Foundations

 

▪    Theatre Groups, Museums, Choral Societies, and Art Galleries

 

▪    Homeless Shelters, Soup Kitchens and Food Pantries

 

▪    Animal Shelters and Animal Rights Groups

 

▪    Medical Advocacy and Education Groups

 

▪    Environmental Groups

 

▪    Board Development Organizations

 

▪    Sports and Recreation Organizations

 

▪    Historical Societies

 

▪    Political, Labor, and Fraternal Organizations

 

 

 

   EXAMPLES OF COUNSELOR AND SOCIAL WORKER PROFESSIONAL LIABILITY EXPOSURES

 

Allegations of:

 

▪    Breach of Confidentiality

 

▪    Failure to Warn Third Parties

 

▪    Failure to Prevent Suicide

 

▪    Failure to Diagnose

 

▪    Improper Child Placement or Removal

 

▪    Failure to Protect

 

▪    Negligent Counseling

 

▪    Negligent Referral

 

▪    Wrongful Abandonment

 

▪    Failure to Receive Informed Consent