Professional liability coverage – also known as errors and omissions, or malpractice when it relates to bodily harm – responds to claims that arise from acts of professional negligence. Professional negligence may arise for example from:
- Financial Loss. Your corporation provides engineering advice. One of your certified professional engineers designs the structural support system for balconies in a new condominium. Shortly after construction, glass from balconies falls to the ground. Your client and the construction firm that followed your engineer’s advice demand compensation from your organization to cover the cost of reconstructing the support system.
- Bodily Injury. Your clinic employs licensed professionals – including registered nurses, therapists and physicians. An individual sues a chiropractor who works in your facility after a treatment. The injured person names your clinic and employees in a medical malpractice lawsuit.
In addition to having insurance, it’s important for businesses with professional liability exposures to implement risk management best practices to reduce or mitigate risk.
Managing Professional Risks
Professional liability coverage is designed to cover the costs of an error or of an action that was not undertaken in circumstances where it should have been performed. Real estate agencies, consulting firms, hospitals, engineering firms, law firms, businesses that employ individuals who give advice and professional sole proprietors, to name a few, may consider managing their liability risks in several ways:
- Use a client intake form. A formal approach to establishing a relationship between a service provider and client may help prevent conflicts of interest. Questions to consider include:
- What are the clients instructions
- Are the new client’s goals reasonable and attainable
- What is the fee or billing structure
- Is your business adequately staffed to handle the project?
- Did any potential red flags come up during the interview and information gathering stages?
- Review any available information about previous suppliers who have worked with the potential client. Things to consider include:
- Does the client have a reputation for managing successful long-term relationships with vendors?
- What reasons does the client give for changing suppliers?
- Collect and review as much information as possible when you are evaluating a potential client. In a working agreement or contract, you may wish to include elements such as:
- Proper identification
- Scope of work
- Fee structure
- The responsibilities expected of your organization as well as those expected from your client.
For industry-specific tips and guidance on liability risk best practices, contact your insurance representative.