Operating a business can be risky. Liability insurance can be an important risk management tool that can help protect businesses against third party liability losses. Commercial general liability insurance (also called CGL) and professional liability insurance are two types of insurance policies commonly obtained by businesses that provide professional services.
Read on to learn the key differences between these two types of insurance policies and how they might help businesses navigate what could otherwise be a very challenging situation.
What Does a Commercial General Liability Insurance Policy Typically Cover?
Commercial general liability insurance policies help protect businesses against covered losses for third-party liability arising from bodily injury and property damage. While the terms and conditions of each policy will vary, this type of insurance policy typically responds to covered claims for injuries or property damage caused by a business, its operations, its employees or on its premises. Coverage may also cover claims for personal and advertising injury (e.g. slander and false advertising).
Who Should Consider Buying a Commercial General Liability Insurance Policy?
Commercial general liability insurance can be an important risk management tool for businesses of all sizes. It can help business owners mitigate potentially devastating financial losses in the event of a substantial lawsuit or claim.
What Does a Professional Liability Insurance Policy Typically Cover?
Professional liability insurance (also called errors & omissions or E&O) can help provide financial protection for companies and professionals if a client alleges their work is inadequate or they committed a negligent act.
Professional liability insurance can help an insured pay for the following expenses, subject to policy limits:
- Judgments: Monetary damages awarded to the plaintiff.
- Attorney fees: Costs of hiring an attorney to defend the insured.
- Court costs: Costs such as filing fees.
- Settlements: Claim settled out of court.
While the terms and conditions of each policy will vary, professional liability insurance policies can help protect businesses from losses arising from claims that allege mistakes were made or faulty advice was offered in the course of providing professional services. It can help cover the costs arising from various service-based business liabilities, including:
- Negligence. Professional negligence occurs when professionals breach their duty of care or fails to perform their services to the required standards of their profession.
- Errors. Losses resulting from errors, mistakes, or oversight in performing a service may be covered.
- Omissions. Losses resulting from a professional leaving out important information that a client needs to know may be covered under an E&O insurance policy.
- Misrepresentation. A professional that presents themselves as having experience in an industry when they don’t, may be considered a misrepresentation.
- Inaccurate advice. A client who believes they have been financially harmed by a professional’s advice can bring a claim against the professional.
Who Should Consider Purchasing a Professional Liability Insurance Policy?
Businesses of all sizes and in most industries should consider obtaining a professional liability insurance policy. Some states require that certain types of businesses, such as healthcare professionals, maintain a specific type of professional liability insurance. Oftentimes, clients may contractually require a business to obtain and maintain professional liability insurance when agreeing to work together.
In general, these types of businesses may benefit from considering professional liability insurance, some of which require specific types of coverages and, therefore, have specific policy types available for their industry or business type:
- Law firms
- Consulting firms
- Accounting firms
- Tax preparation firms
- Home inspectors
- Real estate agents
- Advertising and media agencies
- Technology companies
Commercial General Liability vs. Professional Liability Insurance: Should You Consider Both?
One of the main differences between commercial general liability insurance and professional liability insurance is the types of risks that they cover. CGL insurance policies typically cover losses arising from physical-type risks, like bodily injury or property damage, while professional liability insurance policies generally cover losses arising from financial-type losses like business error and negligence.
Because these policies generally cover different risks and resulting losses, certain businesses could benefit from maintaining both types of commercial insurance. That is why it is important for business owners to discuss their coverage options with a licensed and experienced insurance agent or broker.
How We Can Help
We can help businesses find the appropriate coverage for their specific needs. We can help find an insurance solution that’s right by matching businesses to the appropriate insurer and helping to create a personalized insurance solution for them.
Source: https://www.acrisure.com/blog/commercial-general-liability-vs-professional-liability