Licensed professionals can buy professional liability insurance to protect against lawsuits arising from work-related errors. This insurance is sometimes called malpractice insurance or "errors-and-omissions" insurance. Many people are familiar with medical malpractice insurance for doctors, but there are also special policies for other categories of professionals, like architects, engineers, and others.
The Claims-Made Approach
Generally, professional liability insurance policies are "claims-made." Coverage is triggered by the date the insured first becomes aware of the possibility of a claim and notifies the insurer. The policy period for a claims-made policy extends backward to a retroactive date before the policy was purchased. Therefore, the policy can provide coverage for claims reported during the policy, even if they stem from actions or events that pre-date purchase of the policy.
The Occurrence Approach
Malpractice insurance can also be "occurrence-made." These policies cover errors made while a policy is in force. It does not matter when a lawsuit occurs. For example, if an architect has an occurrence-made policy in 2005, lets it expire in 2006, and is sued in 2007 for an incident that occurred in 2005, the architect is covered since the incident occurred while the policy was in force. Occurrence-made policies are generally more expensive than claims-made policies.
Coverage Amounts for Errors Can Vary
Professional insurance policies offer a wide range of coverage amounts. Most insurance coverage amounts, called limits of liability, begin at $100,000. However, you can purchase coverage for millions of dollars. Your premiums increase with your coverage amounts. The main reason for buying malpractice insurance is to protect your personal assets. Therefore, you should choose coverage that adequately protects the value of your estate.
Consider Your Legal Costs
Professional liability insurance policies provide and pay for your legal defense. Your legal fees can be either inside or outside your limits of liability. For example, if you have $100,000 in coverage and your defense attorney charges $20,000, you then have $80,000 left to pay a judgment or settlement if your defense costs are inside your limits of liability. Policies with defense costs outside your limits of liability are generally more expensive.
An Insurance Lawyer Can Help
The laws on professional liability insurance and claims can be complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact an insurance lawyer.