Understanding the Professional Liability Insurance Policy

A Professional Liability Insurance policy insures a professional or business owner against lawsuits and settlements brought about by their actions on behalf of a client. This can include suits brought because of work that was not done, work that was shoddily done, negligence, or other actions that brought about a financial loss to the client. With some types of Professional Liability Insurance such as (Medical Malpractice Insurance) coverage is provided for bodily damage done to a client as well.

For example, an electrical engineer could be sued by a client if a mistake in a wiring plan led to work needing to be redone and expensive delays. Or an accountant could make a mistake that could lead to a hefty fine by the Internal Revenue Service. One of the most common types of Professional Liability Insurance provides coverage for doctors, who are often sued because of bad outcomes from treatment or surgery.

In general, a Professional Liability Insurance policy pays the costs of any settlements or judgments to a third party, depending on the limits of the policy and any applicable laws. In most jurisdictions, an insurance policy cannot pay punitive damages, which can be substantial in a case where negligence is proven. Perhaps most importantly, the Professional Liability Insurance policy also pays the costs of defending the insured business against a lawsuit, whether or not they are ultimately judged at fault. The costs of defending against a lawsuit can be astronomical even when a suit is groundless and can potentially bankrupt a business. With a Professional Liability Insurance policy a business owner knows that the legal costs of defending against a suit will be covered, at least up to the policy limits.

 

 

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