Why Most Professionals Are One Lawsuit Away From Financial Ruin

We live in a litigious age, and professionals constantly face liability threats during the course of their work. Health care providers, lawyers, financial advisors, or anyone delivering professional services where loss or damage could arise as a result of that work, needs to protect themselves. The consequences can be huge and the professional may have to foot the bill themselves, if they don’t have the protection of Professional Indemnity Insurance or sufficient levels of cover.

Do you need it?

Levels of cover vary greatly and insurers often specialize in particular fields. Whether you need cover and how much will depend on the risk of being sued, the size of the potential claims, whether it’s general practice in your industry and whether clients expect it.

Cover

Looking at the level of overall cover is obviously crucial, and should match the average payout in your field, but fine print is also important. How are defense costs paid? They may be included in the liability limit, reducing the amount of payout available. Or, they may be payable in addition to liability limits. Most malpractice insurance policies will cover acts which occurred prior to the start of the policy, but you need to check this. You may also want a clause stating that your consent is required before any settlement is made, in case you want to fight on. If you do, a Hammer clause is likely to be included, meaning you will be responsible for all further costs, if the insurer has determined settlement is appropriate.

Finding an Insurer

Identify insurers that specialize in your field. Professional Associations, such as the American Bar Association and the American Medical association for example, will have lists of specialist insurers. Colleagues or other professional in your industry can also be a good source of referrals.