Texas Professional Liability

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Professional Liability
If you’re searching for a better understanding or knowing what of Texas Professional Liability is all about, you have come to the right place.

Professional Liability Insurance (PLI), also called Professional Indemnity Insurance (PII) but more commonly known as Errors & Omissions (E&O) in the US, is a form of liability insurance that helps protect professional advice- and service-providing individuals and companies from bearing the full cost of defending against a negligence claim made by a client, and damages awarded in such a civil lawsuit.

Texas Professional Liability focuses on alleged failure to perform on the part of, financial loss caused by, and error or omission in the service or product sold by the policyholder. These are potential causes for legal action that would not be covered by a more general liability insurance policy which addresses more direct forms of harm. Texas Professional Liability coverage sometimes also provides for the defense costs, including when legal action turns out to be groundless. Coverage does not include criminal prosecution, nor a wide range of potential liabilities under civil law that are not enumerated in the policy, but which may be subject to other forms of insurance.

Texas Professional Liability insurance is required by law in some areas for certain kinds of professional practice (especially medical and legal), and is also sometimes required under contract by other businesses that are the beneficiaries of the advice or service. Texas Professional Liability Insurance may take on different forms and names depending on the profession. For example, in reference to medical professions it is called malpractice insurance, while Errors and Omissions (E&O) insurance is used by insurance agents, consultants, brokers and lawyers. Other professions that commonly purchase Professional Liability Insurance include accounting and financial services, construction and maintenance (general contractors, plumbers, etc., many of whom are also surety bonded), and transport. Some charities and other nonprofits/NGOs are also professional-liability insured.

What Texas  Professional Liability covers

Texas Professional Liability Insurance policies are generally set up based on a claims-made basis, meaning that the policy only covers claims made during the policy period. More specifically, a typical policy will provide indemnity to the insured against loss arising from any claim or claims made during the policy period by reason of any covered error, omission or negligent act committed in the conduct of the insured’s professional business during the policy period.

Claims which may relate to incidents occurring before the coverage was active may not be covered, although some policies may have a retroactive date, such that claims made during the policy period but which relate to an incident after the retroactive date (where the retroactive date is earlier than the inception date of the policy) are covered.

Coverage does not include criminal prosecution, nor all forms of legal liability under civil law, only those specifically enumerated in the policy. Cyber Liability, covering data breach and other technology issues, may not necessarily be included in core policies, although it is readily available on the market.

Errors and omissions insurance

Errors and Omissions (E&O) insurance, which may exclude negligent acts other than errors and omissions (“mistakes”), is most often used by consultants and brokers and agents of various sorts, including notaries public, real estate brokers, insurance agents themselves, appraisers, management consultants and information technology service providers (there are specific E&O policies for software developers, website developers, etc.), architects, landscape architects, engineers, attorneys, third-party business administrators, quality control specialists, nondestructive testing analysts, and many others. A mistake which causes financial harm to another can occur in almost any transaction in many professions.

Gaps in coverage are common in E&O coverage. A modest survey suggested that most professionals are unaware of what a gap in coverage really is or its harsh consequences. Several professionals agreed that they incorrectly believed since they were not writing business during specific months, they did not need continuous coverage. A gap in coverage should not be confused with terminating or not renewing a policy due to retirement or death. In these cases, an Extended Reporting Policy (ERP) may be purchased. The availability of extended reporting policies depends on the carrier, the specific policy, and the reason for terminating business. Certain provisions will limit the professional from writing new business during the ERP, since only past policies are generally covered in an ERP policy, nothing current or new.

Texas Department of Insurance  statutorily authorize certain companies to write Professional Liability Insurance. All licensed companies in this section contribute to the GUARANTY FUND .

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To find out more about these, as well as other business insurance products and services, contact Lou Zettler at www.louzettler.com