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Professional liability lawsuits are civil legal actions filed against you, your company, or one of your company representatives. These lawsuits often get filed when customers believe your company made a professional mistake or was negligent in providing services. Depending upon your specific business structure, you may not qualify for lucrative sub-contractor work if you do not have the appropriate form of professional liability insurance. Many larger clients and government operations will not hire companies who do not carry this coverage either, and in many parts of the country your industry may be required by law to carry this before doing any business within a given area.
Professional liability insurance, or PLI, is also known as Errors and Omissions (E&O) and professional indemnity insurance (PII). This coverage has specialized names for certain industries, such as malpractice coverage for medical professionals. Despite the variance in names, this commercial insurance coverage applies protection to companies that offer professional services and advice. When your services or advice cause financial loss or other harm to a client, they may file a civil negligence lawsuit against your company. This policy differs from general liability in that it affords protection for your company if mistakes or omissions are made, or allegations of similar wrong doings arise.
This insurance policy helps to protect you by providing for the costs of your legal defense when necessary, even if you are later found to not be at fault for the accusations placed against you. It is often required coverage by law in some parts of the country, and other companies often will not hire sub-contractors that do not carry this coverage because it puts their own company at risk.
There are important things to know about how a professional liability insurance policy works, because they differ from other types of commercial insurance.
Professional liability insurance pays for reasonable defense related costs when civil lawsuits are filed against your company for negligence and other covered claims. This policy provides for the cost of your defense even if you are later found not guilty or if a fraudulent allegation is made.
Professional liability insurance works on a notice of claim basis, which means that it will provide protective benefits only while your policy is open and active. If lawsuits are filed against you after you have terminated the policy, regardless of when the supposed incident happened the policy benefits do not apply.
Wrongful acts include negligence, errors, omissions or other breaches of duty from professional services that you supplied. This policy provides for your defense of wrongful act accusations whether warranted or not, and pays for settlements or judgments if they’re awarded by the court.
A retroactive date is the date specified on your professional liability policy as the start of business. Generally your policy benefits apply from this date forward, until the date of termination.
Tail coverage is a phrase used to signify an extended reporting period. With this added to your professional liability insurance, the notice of claim limitations are removed. With this extension, if an event happens while your policy is active but the event is not reported until after you have terminated the coverage, all protective benefits of the policy apply.
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