Work mistakes and oversights
Sometimes a simple mistake can cause one of your clients to lose money. When a client sues over an error made by your business, professional liability insurance can help pay for your legal defense costs and more.
Example: An app developer builds an iPhone app for a big tech company. After the app's release, it becomes clear that the app performs poorly on certain devices due to mistakes in the code. The tech company sues the app developer over the issue.
If your business promises to provide a service and fails to deliver, a client could sue – especially if it negatively impacts the client’s bottom line.
Example: An IT consultant promises a tech company that it will improve its profits by 20% by a certain date. When the date arrives, profits have gone up, but not as much as projected. The company sues the IT consultant over its financial troubles. Professional liability insurance helps cover the consultant’s legal defense costs.
If your business is accused of negligence, such as failing to meet industry standards, then it could face a professional liability lawsuit.
Example: An IT staffing firm supplies an employee to a large tech company for a role in database administration. The employee lacks the basic skills necessary to fulfill the role, but the company only finds this out after signing a contract. The tech company sues the staffing firm for negligence.
If a professional misses a deadline, it can have tremendous repercussions for a client. Professional liability insurance provides protection when a client sues over late work.
Example: A web design company is tasked with building a new website for an e-commerce company. When the project takes longer to complete than promised, the e-commerce company sues the web design company over the potential lost profits.
Customer injuries or property damage
If a customer is injured on your premises or you accidentally damage a customer’s property, general liability insurance can help pay for medical expenses or the cost of repairing or replacing the damaged item. It can also cover legal expenses if the customer sues.
Example: A customer trips on the front step of your computer repair shop and breaks her arm. Your general liability policy can cover the cost of her medical expenses, including physical therapy and medications. If the customer refuses your assistance and opts to sue, your policy can help cover the cost of hiring a lawyer and other legal expenses.
Workers' compensation insurance is the policy that covers medical expenses and partial lost wages for employees with work-related injuries or illnesses.
Example: A software developer is diagnosed with carpal tunnel syndrome due to keyboard overuse, your workers' comp policy would pay for their medical treatment, including long-term medication and physical therapy.
The property coverage included in a business owner’s policy (BOP) can pay for items that are damaged, destroyed, stolen, or lost.
Example: A fire at a digital marketing agency destroys part of a building along with the company’s computers and furnishings. The property insurance included in a business owner’s policy could pay for the cost of renovating the building and replacing the ruined items.
Employment practices liability insurance (EPLI) can cover lawsuit expenses related to claims of harassment, discrimination, and wrongful termination.
Example: A director at a web development company promotes an all-male team of specialists to work on a major project with the CEO, who has a reputation for favoring male employees. The most qualified employee in the department, a woman, is overlooked. She files a lawsuit against the company, and the EPLI covers the legal costs, including settlement.
Example: An IT consultant driving to meet a client in his personal vehicle gets into an accident. His personal auto insurance excludes business use, but luckily he purchased a hired and non-owned policy that covers the damage his vehicle caused.
Cyber liability insurance can pay for legal expenses, credit monitoring services, and other recovery costs if a data breach or cyberattack affects your company or your clients.
Example: A data analyst accidentally opens an email containing a malicious computer virus. The virus encrypts crucial data and demands a ransom for its retrieval. Cyber liability insurance reimburses data analyst for the ransom and the cost of hiring an expert to investigate the attack.
Professional liability insurance has other coverage exclusions as well. For example, it doesn't pay for lawsuits that allege client discrimination or abuse.
It also only covers the cost of defending against lawsuits – it doesn't pay for lawsuits you initiate. For example, this policy won't cover your legal costs if you sue a client who refuses to pay you.
Unless your policy has prior acts coverage, it only covers claims filed while the policy is active and for incidents that occurred after you bought the policy.
Endorsements can fill gaps in your professional liability coverage. To make sure you have the coverage you need, contact a TechInsurance agent.