What is Specialised Liability Insurance & Why do you need it?

In an ideal world, every interaction with a client, customer or supplier would have a mutually beneficial and happy ending. In reality, these parties can be dissatisfied with a product or service you provided or an experience they had with your business. In rare cases, they may feel justified in making a legal claim against you. 

When this happens, it won't matter whether you were at fault or could have prevented anything. You'll still need to pay a host of legal expenses and fees, and if you're found guilty, pay out the claim in full. 

If you think this could happen to you based on the nature of your business or what it provides, it's worth exploring Professional Liability Insurance from Auto & General.

Keep reading to discover what this type of liability insurance coverage can include and how to customise a Professional Liability business insurance package for your needs.

What is Professional Liability Insurance?

Professionals working in specific public-facing industries or environments could seriously impact these individuals through accidental negligence or errors. Should they take action against you, their allegations can impact how others perceive your business. Defending yourself can help you preserve your reputation[1] and retain existing customers, but this can incur legal costs. 

Take the following scenario as an example. Henry is an accountant specialising in keeping clients financially compliant when purchasing investment properties. He facilitates an investment property purchase for a client, who later sues him as they allege he set up the investment as the incorrect tax entity, resulting in auditors fining them tax-related penalties. 

Henry has Professional Liability Insurance, so he secures suitable legal representation in his defence against this third-party negligence claim. 

H2: How Professional Liability Insurance works

While Professional Liability Insurance isn't compulsory for South African professionals, the liability coverage it offers can protect your business in various scenarios, but with certain terms and conditions worth bearing in mind. 

Depending on the level of personal liability insurance you purchased, your profession, your customer offering and your business size, insurers will honour any error, omission or negligence-based claims issued against you. Certain limits may apply, and liability insurance for professionals omits coverage when intentional misconduct, fraud or criminal activities are involved. Your coverage will only cover claims made after you took out the Professional Liability Insurance. Your premiums will depend on your claim history, business size and profession-specific risk profile.

What is included in Professional Liability Insurance?

Here are some instances where liability insurance coverage will protect you:

• Negligence or defect-related claims — Allegations that you breached your duty of care, resulting in a client losing money or sustaining damages to their belongings, property or person. 
• Defamation, libel or slander-based claims — Inaccurate or negative claims made against you in the workplace. 
• Confidentiality claims — Allegations that you breached client confidentiality or invaded their privacy.
• Intellectual property claims — Claims that you violated or infringed on another party's copyright, trademark, or patent.
• Advice-related claims — Claims arising after a client faces loss or damages resulting from your negligent advice or advice containing errors and omissions.
• Legal costs — Your legal, expert witness, or court costs or fees will be covered. 

Who needs Professional Liability Insurance?

Most public-facing businesses will benefit from Professional Liability Insurance, including the following:

• Legal professionals — Lawyers and law firms can face claims from clients alleging negligence, misrepresentation or a breach of duty.
• Architects and engineers — These professionals can face claims based on design or construction errors, omissions, or failures resulting in loss, damage or death. 
• Financial professionals — Accountants can face claims from clients alleging negligence, misrepresentation or a breach of duty in the financial advice they provide that results in losses.
• IT & other technology professionals — Accidents and errors can result in clients losing money, leaking private data and losing customers.
• Real estate professionals — Professionals involved in helping others purchase or sell property can face professional negligence, misrepresentation, or breach of duty claims that result in an unfair property sale or purchase.

How much does Professional Liability Insurance cost?

The cost of Professional Liability Insurance in South Africa depends on several factors, including:

• Type of profession - The level of risk associated with a particular profession can impact the cost of Professional Liability Insurance. Professions that are considered high-risk may have higher premiums.
• Coverage amount - The amount of coverage needed can impact the cost of the policy.
• Claims history - A professional's claims history can impact the cost of insurance. Professionals with a history of claims or lawsuits may be considered higher risk and may have higher premiums.
• Business size - Larger businesses with more employees or higher revenue may pay higher premiums.
• Location - The location of a business can impact the cost. Businesses operating in areas with higher risks or higher living costs may pay more.
• Deductible - the amount the insured must pay before insurance coverage kicks in can impact the insurance cost.

These factors can vary depending on the specific policy being offered, as policies are tailored and aligned with different business needs.

Get Professional Liability Insurance from Auto and General

Professional Liability Insurance is a highly individualised product. What works for you may not work for someone else, even if they work in the same industry and perform similar tasks. Select an insurer who can patiently walk you through the process and ensure you are fully covered to prevent shortfalls and enjoy peace of mind. Auto & General can assist you, so request a quote today.