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Professional liability insurance protects professionals such as attorneys, accountants and consultants. Most professional liability policies only cover economic or financial losses that third parties suffer. Generally, they do not cover bodily injury and property damage claims, although there are some exceptions (i.e. physicians, engineers and architects). The most common professional liability insurance is errors and omissions insurance (E&O).
A professional liability policy is structured based on the coverage trigger—either occurrence or claims made.
When a policyholder has an occurrence-based policy, it covers any claim resulting from an event that took place during the coverage period, regardless if the policy has expired. This could result in a claim being paid out years after a policy has expired. Subsequently, an occurrence-based policy can be more expensive than the alternative—a claims made policy.
Claims made coverage is triggered when a claim is made against the insured during the policy period, regardless of when the event that resulted in the claim actually happened. However, it provides little or no coverage for claims made once the policy expires.
It is important to consider the pros and cons and each policy type before choosing between the two types of policies. Costs, limits and availability should factor into your decision.
For more information on Professional Liability Insurance and other types of insurance, contact TSIB at 201-267-7500.