Understanding Professional Liability Insurance Made Easy

What is Professional Liability Insurance?

Professional Liability Insurance, sometimes called “professional indemnity insurance” or “errors and omissions insurance”(aka e&o insurance), protects you from claims made by clients who allege that you either failed to provide the services you agreed to perform, or that you provided them in a substandard way. If you are sued, this type of insurance can help cover the cost of defending yourself, as well as any damages or settlements you may be ordered to pay.

Is Professional Liability Insurance the same as Public Liability Insurance?

Each type of insurance policy serves a different purpose. As such, each has its own distinct features. Public Liability Insurance protects you from claims made by members of the public who allege that they have been injured or that their property has been damaged as a result of your negligence or during the course of their engagement with your company. Professional Liability Insurance, on the other hand, is designed to protect you from claims made by clients who allege that they have suffered financial loss as a result of your (or a subcontractor’s) professional negligence, such as an omission, or because you provided inaccurate advice. It can also protect you against damaged or lost documentation, and defamation claims.

Why is Professional Liability Insurance important?

It’s important because if a client were to sue you, the legal cost of defending yourself (or, in this case, your business) can be extremely high. If you're found liable, the cost of damages and settlements could be astronomical.

What are the benefits of this insurance policy?

The main benefit of this cover is that it can protect you from being held liable for any professional negligence that you may have committed. Professional Liability Insurance can also provide you with financial protection if you’re sued for any damages that your actions may have caused.

Professional Liability Cover Explained

Who needs this type of cover?

If you provide any type of advice or service to clients, you should consider Professional Liability Insurance. Basically, if there’s a risk of something going wrong during the course of your work, and if anybody could potentially suffer a loss as a result, you need Professional Liability Insurance. Say, for example, if you’re a...

• Medical professional
• Lawyer
• Accountant
• Architect
• Engineer
• Quantity surveyor
• Financial services provider
• Insolvency practioner
• Consultant
• IT professional
• Counsellor

When would it be compulsory?

It’s not compulsory for everyone. However, some professions are required by law (or by their professional bodies) to have this type of insurance. For example, South African law requires that all medical professionals have medical malpractice insurance, which is a specialised type of Professional Liability Cover. Financial services providers are also required to have an adequate level of Professional Liability Cover. While legal practices are covered by the Attorneys Insurance Indemnity Fund, this does not cover individual practitioners, so top-up personal Professional Liability Insurance is available.

What is and isn’t covered by Professional Liability Insurance?

In South Africa, it protects individuals and businesses from claims, including legal costs and settlements for errors and omissions (hence the term “e&o”, which we mentioned earlier), misrepresentation, libel or slander, professional negligence, failure to meet expected standards, breach of contract, and failure to deliver a service on time. It does not cover physical harm, such as injury or damage to property suffered while someone is doing business with you, nor does it cover claims from employees, such as injury or illness occasioned by their work, wrongful termination or harassment suits. It will not cover a data breach either.