Professional Liability Insurance Explained: What Service Providers Need to Know 

You could be a highly skilled and experienced professional, but professional services would always carry some level of risk. A single error, late delivery, or misunderstanding could lead to a costly claim that can disrupt your business and damage your reputation. 

That’s where Professional Liability Insurance, also known as Errors & Omissions (E&O) insurance, comes into play. Whether you’re an accountant, consultant, healthcare provider, or engineer, this type of coverage helps protect you against claims of negligence, mistakes, or failure to meet professional standards. In this article, we break down what professional liability insurance typically covers, what it doesn’t, and why tailoring it to your industry is essential for long-term risk management. 

Professional liability policies are designed to protect you when a client claims your services caused them harm, whether financial, reputational, or emotional. This policy typically includes: 

• Negligence: Mistakes in services that can result in client harm. 
• Legal Defense Costs: Covers legal fees to fight against claims, even if they are baseless.  
• Claims and Damages: Settlement amounts and court-awarded damages tied to the professional service. 
• Personal Injury: Including Libel, slander, defamation, or privacy violations.  
• Retroactive Coverage: This is situational. If you have purchased this sort of coverage, then your policy would cover you for any services performed even before the policy was purchased (only if the claim occurs after your retroactive date), if there was no prior knowledge of a potential claim. However, if you do not have retroactive coverage, then the policy would only cover the claims that occur during the policy period.  

While these are the areas that the policy covers, there are also some common exclusions that it does not cover. These are: 

• Intentional or fraudulent acts 
• Bodily injury and property damage (covered by general liability) 
• Employment practices (separate coverage required) 
• Discrimination or harassment claims 
• Breach of contract not tied to professional negligence 
• Cyber-related incidents (generally excluded unless endorsed) 

Professional liability insurance isn’t just designed for large firms, it’s a smart investment for any business, big or small, offering expertise, advice, or services. You can avoid massive financial devastation from an unexpected claim by tailoring your coverage in line with your profession, services, and risk exposure.  

Get in touch with an experienced insurance agent today to ensure your policy reflects the right levels of protection, so that you can focus on what you do best, with confidence.