Yes, You Need Professional Liability!
Imagine this: You work from home with a home-based business. You never ever meet clients face-to-face, and if you do, you don't ever meet them at your house. You're probably thinking, "Since I don't have a building, I don't need insurance right?" Well, not exactly.
What is Professional Liability?
Everyone that runs a business, from a home-based real estate professional, to office work jobs needs to have Professional Liability (PL). PL, also known as "E&O" or errors & omissions, is a form of liability insurance that covers you and your business from negligent acts relating to professional services or advice.
This is different from General Liability (GL), which mostly protects a business from physical claims, such as a slip or fall on a property, or bodily injury due to faulty workmanship.
Even though you may not own a physical office space where clients are coming to see you, nearly everyone engaged in business transactions has an exposure to professional liability claims.
Who is at risk?
Pretty much any business has an exposure to PL claims. Accountants, Realtors, Insurance Agents, Doctors, Graphic Designers, Financial Advisors...these are just a few examples of industries that carry PL insurance. Think about your field of work, what kind of mistakes can be made?
Let's use an example of Steve the Accountant.
Steve own's Steven's Bookkeeping, LLC. For years, Steve has been reconciling his client's bank accounts correctly without a hitch. One day while working on the books for Scott's Plumbing, he incorrectly entered some bank deposits from Scott's bank account. Neither Steve nor Scott catch the mistake and it goes unnoticed. When tax time rolls around the following year, Steve sends in Scott's tax return to the IRS as he does every year and sends Scott an invoice. However, the IRS (who usually never miss a beat...) notice the inconsistency and trigger an audit on Scott's books. This causes Scott to incur unnecessary expenses and now Scott is looking at Steve for compensation for the mess this has caused.
Without professional liability, Steve is 100% on the hook personally for every dollar in financial damages that his simple accounting mistake has caused; he has no insurance to protect him for a financial mistake.
This is just one of many examples of exposures that your business might have.
Cover Your Gaps
The best way to evaluate your business's exposure to PL gaps is by running through this basic checklist:
Do you handle any sort of funds for others? Yes or No
Do you work in a capacity that provides advice to others? Yes or No
If you make a mistake in your work, can that impact your business financially? Yes or No
Are you in a position of fiduciary trust for external clients? Yes or No
A yes answer to any of these means you need to secure PL insurance, or risk putting you, your business and your assets in a very tough spot should a mistake or error occur.
To discuss your business needs with a commercial insurance expert, call or visit the Encompass Agency, Inc. today to request a consultation (716-835-6790 WNY, 315-657-3688 CNY, www.encompassupstate.com)
Taylor M. Haines is an Independent Agent and Managing Broker of the Encompass Agency, Inc. He writes auto, home and business insurance in Buffalo, Rochester and Syracuse, and has clients as far-reaching as the Adirondack region. Taylor has been the acting manager of the agency since 2015 and has overseen the expansion of the brand throughout New York. He is married to his wife, Megan, since 2016 and resides in South Buffalo.