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Professional Liability Insurance Choices for Small Businesses

If you’ve been in the market for business insurance lately you already know that there are a full range of options. The world of insurance is constantly changing and can be difficult to understand and navigate. One of the things that a lot of people get confused about is what is covered by General, Professional and Cyber Liability insurance. Professional Liability can be a stand-alone coverage or part of a broader Cyber Liability program. Likewise some aspects of Cyber liability, within Intellectual Property Infringement, are also covered in a typical General Liability policy. Confused yet?

My goal is to help you be an educated insurance consumer and eliminate redundancies or gaps in your coverage. Here are a few related questions that may be helpful in making decisions about your risk management program:

      What is third party liability?

  • The 1st party is you; the 2nd party is the insurance company that sells you liability insurance and the 3rd party is someone who sues you. Third party liability is the risk of a 3rd party suing you claiming financial damages as a result of your professional services.

      What does Professional Liability cover?

  • If you make a mistake, or are accused of making a mistake ( such as errors, omissions, and negligence) that results in financial damages. Covered losses include defense costs, settlements/judgments, pre- & post-judgment interest, damages, including both monetary awards as well as statutory, punitive, multiplied and exemplary awards where insurable.

      What doesn’t Professional Liability cover?

  • False advertising, antitrust/unfair trade, patent infringement, product recall, and license fees/royalties.

      What does Cyber Liability cover?

  • Professional Liability – See above.
  • Intellectual Property Infringement (also called Media Infringement/Liability) – 3rd party coverage for acts arising out of your online products, services, and publications, release, dissemination or display of content (including your advertising activities, but excluding patent infringement).  Coverage for off-line media activities is typically considered within a General Liability policy.
  • Network Security* – protects you from losses arising out of a failure of your computer systems’ security causing a financial loss to a 3rd party.
  • Privacy* – covers claims where there is a loss of Personally Identifiable Non-Public Information (PINPI) in your care, custody or control (on-line or off-line).

      Am I covered under my General Liability policy for any of the above?

  • As noted under Intellectual Property Infringement, it is likely you have some coverage included under your General Liability for things like: defamation, libel, slander, infliction of emotional distress, interference with right to private occupancy/trespass/wrongful entry or eviction.  This coverage is typically provided under the Personal Injury and Advertising Injury coverage parts of the general liability policy and is generally limited to off-line activities.

*Note that both Network Security and Privacy coverage components can be extended to provide protection for 1st party financial expenses and crisis management related to security breaches and/or loss of corporate/employee PINPI.

Everyone wants to avoid or minimize any harm coming to them and their livelihood. Thankfully there are solutions that can be customized for every kind of business. As independent consultants, freelancers, entrepreneurs and small business owners, we invest our blood, sweat and tears…or at least our time and money, into our businesses. Getting the right insurance is more than a contractual obligation – it can help you gain real peace of mind.

BizInsure Guest Blogger: Steve Geller

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