In the dynamic world of modern business, professionals from all industries face a myriad of risks during their daily operations. Despite one’s utmost diligence and dedication, the unpredictable actions of others or unforeseen circumstances can lead to allegations of negligence or malpractice. It happens more often than you might think; in the medical field alone, an average of 85,000 medical malpractice suits get filed yearly.
When faced with such claims, legal defense costs can place an enormous burden on any business. However, there is a proactive and reliable solution to mitigate these potential financial setbacks: professional and management liability insurance. This invaluable insurance coverage serves as a protective shield, offering essential support to professionals and managers who find themselves entangled in legal battles. By obtaining this specialized insurance, businesses can ensure they have the necessary resources to face allegations of negligence, malpractice, errors, or omissions.
In this article, we will delve into the many advantages of professional and management liability insurance, exploring how it can offer critical financial protection and aid in covering legal defense costs. By sharing with your clients the comprehensive benefits this insurance provides, you can help them make informed decisions to safeguard their business and professional reputations.
What Is Professional and Management Liability Insurance?
Professional and management liability insurance not only safeguards businesses from unexpected legal expenses but also provides peace of mind. It enables them to focus on their expertise and core operations, knowing that they have a safety net to navigate through challenging legal scenarios. Whether they are seasoned professionals or budding entrepreneurs, having this insurance coverage can make a significant difference in securing the future of their businesses.
Management liability coverage refers to policies that protect professionals such as lawyers, accountants, insurance agents, and physicians against negligence claims, mistakes, malpractice, and misrepresentation. Types of coverages include:
- Medical malpractice: Medical malpractice is specifically for medical providers, protecting against lawsuits due to alleged medical mistakes.
- Errors and omissions: E&O insurance protects those who advise as part of their profession. For example, lawyers, accountants, real estate agents, and insurance agents often advise their clients. If a client takes a professional’s advice but the result is negative, they may file a claim, and the professional would need E&O for protection.
- Directors and officers: A D&O policy protects high-ranking officials in companies and nonprofits from risks associated with being a leader. Directors and officers should exemplify a higher standard than other company members.
The type of professional coverage depends on the profession and the risks involved. Most professional liability policies are claims-made. Professionals can only use the coverage for events while they have the policy. If their policy expires, however, they still have coverage for any claims made from incidents that occurred while they had coverage.
What Is the Cost of Legal Defense in a Professional Liability Case?
Regarding defense costs, different professional and management liability coverages have different rules about obtaining a defense attorney. For example, some insurance companies will include a “duty to defend” policy in which they provide the accused with an attorney. However, if an insurance company has a “non-duty to defend,” the insured may receive a reimbursement policy form.
A reimbursement form gives insureds the duty to defend themselves. They provide their attorney and receive reimbursement for the associated costs. Generally, there are limits within the policy, and defense costs will eat away at the limit. For example, if it’s a $1 million policy, the legal fees come out of that limit, and each dollar equals one less dollar for a settlement.
Regarding policy limits, professionals must consider the types of allegations their businesses may face. Legal defense costs are expensive, and they want to ensure you do not exceed their limits. A small company with fewer than 10 employees may only need up to $1 million. However, a large business may need to look at $2 million or even $3 million policies when preparing for legal defense costs in professional and management liability.
Protection Through Professional and Management Liability Insurance
Businesses face a range of risks consistently, where any client may assert that errors or mistakes on a company’s behalf resulted in financial harm. Nonetheless, with the reliable protection of professional and management liability coverage, your clients can be safeguarded from the financial burdens associated with defense and settlement costs.
About Connected Risk Solutions
At Connected Risk Solutions, we use our expertise and experience to provide insurance information and programs to those who serve long-term care and senior living facilities. Since 2007, we’ve been offering insurance and risk management plans designed to help our agents give their clients the ability to achieve continued growth while simultaneously protecting against loss, containing costs and increasing profitability. With three offices to serve you in Chicago, Illinois; Phoenix, Arizona; and Burlington, Connecticut, we do everything we can to make your experience with us as professional and transparent as possible. To learn more, contact us at (877) 890-9301.