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What Is Professional Liability Insurance Coverage? 

Professional liability insurance, also commonly referred to as errors and omissions (E&O) insurance, is a type of insurance specifically designed to protect service-based businesses from financial losses arising from claims of negligence, errors, or omissions in their professional services.

professional liability insurance

Why Is Professional Liability Insurance Important?

If your business provides professional services and relies on client trust, then professional liability insurance is a crucial consideration for your business risk management strategy.

The Accountant Mistake

Imagine an accountant accidentally miscalculates a client’s taxes, resulting in significant penalties for the client. The client sues the accountant’s firm for negligence. Professional liability insurance can cover the legal defense costs and any settlement reached with the client, preventing the mistake from derailing the accounting firm’s finances.

The Marketing Mishap

A marketing agency accidentally plagiarized content for a client’s campaign. The original creator sues for copyright infringement. Professional liability insurance can help cover the legal fees and any damages awarded to the original creator.

The Architect’s Oversight

An architect misses a critical detail in the building plans, leading to structural problems after construction. The owner sues the architect firm for negligence. Professional liability insurance can cover the legal defense costs and any damages awarded to the owner, protecting the architect firm from financial ruin.


These are just a few examples, and the specific scenarios can vary depending on the industry. However, they all highlight the potential for even minor errors or omissions to have serious financial consequences for a service business. Professional liability insurance acts as a safety net, protecting your business from unforeseen lawsuits and ensuring your hard work doesn’t go to waste.


Who Needs A Professional Liability Insurance Policy In North Carolina?

Professional liability insurance is a valuable investment for a wide range of service-based businesses, including but not limited to:

Consultants

  • Business and management
  • Business communications
  • Market research
  • Media
  • Public relations and crisis management
  • Business and leadership coaching
  • Career coaching
  • Corporate training
  • Economic research
  • Expense savings
  • Human resource
  • Organization structure
  • Wedding

Technology Professionals

  • IT consultants
  • Website developers
  • System designers
  • Software developers
  • Application service providers
  • IT project managers
  • Computer programmers
  • Database administrators
  • Computer consultants
  • Hardware installation experts
  • Integration specialists
  • Online security specialists

Healthcare Professionals

  • Audiologists
  • Dentists
  • Dermatologists
  • Diagnostic testing labs
  • Doctors
  • Occupational health centers
  • Optometrists
  • Physical and speech therapy
  • Podiatrists
  • Surgery centers

Accountants

Market Research Firms

Advertising Agencies

Interior Designers

Graphic Designers

Other Professional Lines

  • Directors & Officers
  • Homeowners Association (HOA)
  • Real Estate

Are you looking for Business Insurance Coverage? At The Huneycutt Group, we represent over a dozen companies and brokers to help you find the coverage you’re looking for, at the right price.


Does North Carolina Require Professional Liability Insurance?

There’s no state law in North Carolina that mandates professional liability insurance. However, having it is highly recommended for most businesses.  It offers significant financial protection for potential lawsuits against your business. Consult with an agent at The Huneycutt Group to understand your specific needs and explore the coverage options available in North Carolina.

Two types of business insurance that are mandatory by state law are:

What Does Professional Liability Insurance Cover?

Here’s a breakdown of what professional liability insurance typically covers:

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Negligence

If your client suffers harm because you didn’t perform your duties with the level of care a reasonable professional would, that could be considered negligence.  Professional liability insurance helps protect your business from the financial consequences of such claims.

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Misunderstanding

The client alleges that your company provided false or misleading information that convinced them to sign a contract for your services. This misrepresentation means the information you presented wasn’t entirely accurate or truthful, and it potentially influenced the client’s decision to enter the contract. The client claims they suffered some kind of loss because of the misrepresented information. This could be financial losses, wasted time, or other negative consequences.

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Inaccurate Advice

If a customer claims you offered advice that caused them harm or damage. For example, a personal trainer could be sued for providing inaccurate advice if a client gets injured following their workout plan. 

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Personal Injury

If someone accuses you or your business of libel or slander, whether it’s true or not. Imagine a local bakery known for its all-natural ingredients launches a campaign highlighting the artificial additives used by some competitors. While the claims are true a rival bakery feels the ads unfairly target them and damage their reputation. This competitor could sue the first bakery for defamation, claiming the advertisements are slanderous. 

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Copyright Infringement

If someone claims you or your business used their copyrighted work without their permission and they sue you for copyright infringement. A photographer posts stunning nature photos on a client’s website claiming it as their own work. This is copyright infringement because the first photographer owns the exclusive right to reproduce and distribute their images.

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Defense Costs

Professional liability insurance protects you from legal defense, even if a client sues for alleged mistakes in your work. These costs can add up quickly, regardless of whether you’re ultimately found at fault. Don’t risk your business finances – get a quote and ensure you’re covered.

What It Doesn’t Cover

It’s important to note that professional liability insurance excludes coverage for intentional wrongdoing: If you deliberately provide false information or act with malicious intent, E&O insurance will not cover any resulting claims.

What Factors Affect Professional Liability Insurance Rates In North Carolina?

Several factors can influence the cost of professional liability insurance for your service-based business in North Carolina.

Your Industry and Practice Area

Insurance companies assess risk based on industry trends. Certain professions may have higher premiums due to the potential for costly mistakes.

Your Claims History

A history of past claims or lawsuits will generally lead to higher premiums. A clean claims history demonstrates a lower risk profile and can potentially qualify you for discounts.

Your Experience and Qualifications

Experience and relevant professional certifications can demonstrate your competence and potentially lower your risk profile in the eyes of insurers.

Your Coverage Limits

The amount of coverage you choose (the maximum payout the insurance company will provide in a claim) directly impacts your premium. Higher coverage limits will naturally cost more.

Insurance Companies And Brokers We Represent

Builders Mutual
Liberty Mutual
The Hartford
Frontline
Philadelphia Insurance

Lloyds of London
Berkshire Hathaway
NC Rate Bureau
Johnson & Johnson
AmWins
Hanover/RPS
Tapco

Appalachian Underwriters
Jackson Sumner
IPC
Allrisks
Orchid

NC Professional Liability Insurance FAQs

General liability covers physical risks, such as bodily injuries and property damage. Professional liability insurance covers more abstract risks, such as errors and omissions in the services your business provides.

Even though you’re trying to run your business perfectly, cross every T and dot every I, mistakes can happen. If the accidental mistake harms your client financially, it can lead to a lawsuit. Professional liability insurance can help protect your business if someone sues you for making a mistake in your professional services. Professional liability insurance protects your business from these types of financial losses.

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