Professional Liability Insurance is a type of liability coverage designed to protect traditional professionals, accountants or attorneys, and quasi-professionals, real-estate brokers or consultants, against liability incurred as a result of errors and omissions in performing their professional services. Common claims that Professional Liability covers are negligence, misrepresentation, violation of good faith and fair dealing, and inaccurate advice. These scenarios are typically not covered by other insurance policies such as the Commercial General Liability policy. Professional Liability is also commonly known as Errors and Omissions.
Professional Liability insurance can be a broad term used to encompass the below specific insurance policies.
Employment Practices Liability (EPL)
A type of insurance covering wrongful acts arising from the employment process. The most frequent types of claims under EPL policies include wrongful termination, discrimination, sexual harassment, inappropriate workplace conduct, and retaliation. The policies typically cover directors and officers, management personnel, and employees as insureds.
Claim Example
A large firm in California was sued for age and gender discrimination by a 65-year-old female accountant. The plaintiff alleged her former employer wrongfully terminated her employment by citing declining work performance as the only reason for termination. The insured was unable to produce any documentation that backed up their allegations of poor work performance. During the claim investigation process, it was discovered that shortly after terminating the plaintiff, the firm had replaced her with a male accountant who was a recent college graduate and could be paid substantially less for the same role. The claim was settled for $550,000 and defense costs totaled an additional $80,000.
Directors and Officers Insurance (D&O)
A type of liability insurance protecting directors and officers for claims made against them while serving on a board of directors and/or as an officer. Whether it’s a for-profit business, privately held firm, non-profit organization, community association, or educational institution, directors and officers can cover themselves with D&O insurance.
Claim Example
The parents of a group of disabled adults sued an organization providing housing for their children, alleging a breach of fiduciary duty. As a result of the investigation, it was determined that the disabled were receiving substandard care due to a lack of funding. The directors and officers were found to be embezzling from the organization, in addition to mismanaging funds. After the jury trial and appeal, the plaintiff’s parents won a judgment in excess of $3,000,000. Defense costs were significant as well.
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