Professional liability coverage is a mainstay for traditional professions including accountants, architects, doctors, engineers, lawyers, real estate agents and many others. Businesses in these fields are generally aware of their exposures and appreciate the benefits of liability insurance. Yet similar exposures are a day to day reality for the less traditional or ‘emerging’ professions, ranging from auctioneers to consultants to employment agencies and printers. There are also a range of new exposures that these firms face, including an explosion of employee lawsuits, increasingly sophisticated employee crime schemes and inadvertent or criminal data breaches that many professions haven’t yet fully incorporated into their risk management plans.

 Negligence, E&O for emerging professions

With the legal landscape still evolving in many of these areas, these ‘emerging’ professions are unfortunately often blind to the exposures they face to third parties making claims of negligence or faulty service. If their client does not receive the benefit they expected or doesn’t receive the deliverables on time resulting in an alleged financial loss, professional liability claims against the professional are likely to follow. Poor economic conditions can increase the odds of these disputes, but, even in good times, our litigious society makes it common for a lawsuit to be the remedy of choice when a client feels they did not receive that for which they paid.

Professional liability or Errors and Omissions (E&O) policies generally cover both judgment and settlement amounts, and perhaps most importantly, defence costs, subject to the policy deductible. Even if the allegations made against the professional are groundless, when a business is sued, they have to provide a legal defence, and the money spent for these expert services can be significant. Many small professional businesses in both emerging and traditional professions are not in a position to fund this defence, leading to a real potential for bankruptcy resulting from such lawsuits.

Jan-Mar 2014 Issue

Hiscox USA