Why Buy Professional Liability Insurance?
Issues arising from professional liability are of great concern today. There was a time when the professional (or quasi-professional) was not a target for lawsuits; clients would never have considered bringing an action against a professional, not even in instances where negligence or errors were obvious.
Times have changed. Today, the public and our legal system expect more and are much more inclined to initiate a lawsuit. When adjudicating cases, the courts have based their judgements on an increasingly higher standard of care and responsibility. The ever-increasing levels of education, training, experience and reputation of professionals have led the courts and the public to expect service which is superior than the average person. This expectation can be overwhelming.
Why have public attitudes changed towards the professionals? There are a number of causal factors. Part of the answer is that the public has become more informed of its legal and contractual rights, and, rightly or wrongly, has been led to believe that a legal action may be initiated from any turn of events that was not an expected outcome by the client.
In addition, the media has brought to public attention the litigious climate of our modern society. Many legal actions have been sensationalized in the press. Lawyers have become much more aggressive in the demands for compensation, seeking ever larger and more extensive settlements.
Another reason why public attitudes have changed is because the relationships professionals have had with their clients have evolved. Traditionally, the connection between the professional and the client was much more personalized than it is today. In the past, clients' trust and confidence in the professional was absolute. Our changing society and financial constraints felt by many clients have heightened their awareness and increased the professional's accountability to the client.
Professional liability insurance is one form of protection for professionals and for their clients. Coverage will shield personal assets and will help maintain a good reputation through the defence of allegations of wrongdoing which might be frivolous or false. For the client who has suffered some damages through the actions of a professional, liability insurance will ensure that there are adequate funds available to make amends for the wrong that has been done.
A professional liability policy covers errors, omissions or negligent acts which may arise from the normal or usual duties carried out by the insured.
When the professional is an employee of a firm, the firm, as the employer, is responsible for the actions of the employee. However, a court of law may find a professional personally responsible for an incident that occurred due to an error, omission or negligent act committed by the professional as an individual. To date, we know of no such situation ever occurring, however, it is our opinion that given the behaviour of the courts in recent times, one may be made personally accountable.
In another scenario, the employed professional may offer a professional opinion or "moonlight" professional services on his or her own time. In this case, the professional would be personally responsible for any consequence of these actions. It is highly probable that the policy of the employer does not provide coverage for the liability exposures of the moonlighter.
Should the limits of the employer's insurance be insufficient to meet the settlement of a claim in which the professional was co-defendant, then personal assets of the professional could be at risk. The difference in limits between the employer's insurance policy and the professional's policy is available to cover any shortfalls in these instances. A professional liability policy offers the insured peace of mind by knowing that he or she has independent coverage and by knowing what limits of that coverage are available.
When claims do occur, the professional's decision to have obtained professional liability coverage will remove the financial consequence of a legal action and provide him or her with a solid, reputable insurer upon whom he or she may rely in full confidence.