Normally, liability insurance is applied to situations where damage has occurred. In the health sector, it relates to bodily harm. When it comes to home or auto insurance, liability comes into play with property damage.
What these policies don’t cover are claims to misrepresentation of a product, negligence on behalf of a company or professional, or advice that is inaccurate. For these, another type of policy is needed in the form of Claimant Professional Liability Insurance.
This form of insurance, also called Errors & Omissions (E&O) Insurance in the U.S., protects professionals and companies that provide advice and service to customers. It covers the damage that individuals or groups might claim due to an alleged failure due to improper information. Where standard liability insurance covers physical damage, professional liability insurance covers some issues from a mental perspective in preparation for a civil lawsuit.
Personal liability coverage is categorized in the following different ways per a specific industry:
Coverage within a personal liability policy is normally set up on a claimant basis. In other words, the insurer only covers the claims that were registered during a certain period. They don’t cover lawsuits and other legal actions that occurred before the purchase of the policy.
Some policies do offer retroactive coverage to deal with incidents that take place after the policy period ends. As this is not part of normal operations, retroactive coverage is offered as an additional option.
It’s important to note that a professional liability insurance claim will not cover criminal prosecution or any form of legal liability. If a company intentionally caused mental or physical harm to an individual or group, that is beyond negligence. In that case, the issue would be part of a criminal lawsuit.
Claimant professional liability insurance is often needed as part of a risk management assessment for either a professional or an organization. When there is a case of negligence on the part of the defendant, this type of policy protects business assets and minimizes the risk of bankruptcy or liquidation.
The cost of this type of policy depends on several factors. One is the value of assets for the professional or the organization. Another is their history of past claims due to negligence and misrepresentation. Those with a poor track record may have to pay higher premiums or might not be considered at all for a policy.