Professional Liability Lawsuit Examples

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For businesses in the service sector, Professional Liability insurance is not just common, but often necessary. Even for businesses outside of the service sector, Professional Liability is still a valuable policy. Alongside mitigating the risks associated with providing services, Professional Liability also covers businesses that sell products or offer advice. At times, services or advice provided to clients may falter and lead to financial losses for those individuals. Professional Liability insurance is designed to mitigate your company’s risk in those situations.

Common Professional Liability Lawsuits

The US service sector is incredibly large, diverse, and complex. According to the Bureau of Labor Statistics, of the more than 150 million people working in the U.S., over 120 million were employed in the service sector. Millions of these companies across the U.S. provide employment in over a dozen industries. With so many moving parts and types of services being rendered, the probability that individual workers or companies will make mistakes while offering services is extremely high. While not all mistakes will lead to a lawsuit, many do.

Common lawsuits among service sector companies include:

  • Breach of contract
  • Failure to render services
  • Significant financial loss
  • Omissions or errors

Professional Liability claims are often expensive to argue in court, so the claims are often charged against businesses when the financial losses are very costly. Doctors, surgeons, CPAs, lawyers, and architects are often targets of these type of lawsuits. This is because the type of errors that these individuals may make are often quite expensive for clients or customers.

For example, a CPA who fails to manage a client's account properly could result in that client losing tens of thousands of dollars, if not more. This is particularly the case if the customer was a business, and the CPA was responsible for managing complex business tax codes that were filed incorrectly. A lawsuit in this situation would be almost certain occur. Professional Liability insurance would help to cover the CPA and his or her company during the process, provide monetary protections for the judicial proceedings and may cover a certain amount of the payout, depending on the total liability coverage.

Or, consider a lawsuit stemming from oversights and errors. If an architecture firm designs a building that fails to meet certain safety standards, the construction company may have to go back and fix those errors. This will be costly both for the construction company and the client for whom the company is constructing the building. Either the construction company or the entity who will own the finished building may file a lawsuit against the architecture firm for oversights and errors that caused significant cost overruns.

Professional Liability Limitations

All Professional Liability insurance is limited in what risks it will cover, and how much financial support it will provide if a claim does arise. The covered amount will vary, depending on how much liability coverage you decide to purchase for your company. As with all insurance policies, the premium costs will rise as you increase your total coverage.

Professional Liability covers many areas related to errors and omissions on the part of service industry companies, but will generally not cover areas such as:

As such, protections that are not written into your policy will not be covered, and your policy will not pay out beyond the designated limited. For example, if your business purchased a policy with a $500,000 limit, any amount beyond this would need to be covered by your company. Limits are tied to not just the total cost of a legal defense, but any settlements or judgments that your business may incur as a result.

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