Professional Liability Insurance

What is professional liability insurance?

Professional liability insurance, also known as errors and omissions insurance, protects professionals against claims of negligence, mistakes, or omissions that may occur while providing their services. This insurance is essential for various professionals in Florida, including lawyers, accountants, architects, and healthcare providers.

For example, a client may sue an architect for damages if a design error leads to costly construction delays or building defects. In this case, professional liability insurance would cover the architect’s legal defense costs and any damages awarded to the client up to the policy limits. Another example is a healthcare provider accused of medical malpractice due to a misdiagnosis or improper treatment. Professional liability insurance would help cover the costs of defending the provider and any potential settlements or judgments.

Need help with a matter related to Professional liability insurance? Schedule your consultation today with a top insurance attorney.

In Florida, which laws and regulations relate to professional liability insurance?

In Florida, laws and regulations regarding professional liability insurance are industry-specific and often governed by state licensing boards. For instance, the Florida Board of Professional Engineers requires professional engineers to maintain E&O insurance coverage as a condition of licensure.

Another example is the Florida Department of Financial Services, which oversees insurance agents and agencies in the state. Insurance agents are required to maintain a specific level of E&O insurance coverage as a condition of licensure.

In summary, professional liability insurance is a crucial form of protection for professionals in Florida. The laws and regulations governing this insurance are industry-specific and often dictated by state licensing boards. By maintaining adequate coverage, professionals can safeguard themselves against potential claims of negligence or errors, which could otherwise result in significant financial losses.

What are common disputes regarding professional liability insurance that lead to litigation?

The following disputes are among the most common in actions regarding professional liability insurance in insurance procurement and coverage matters:

• Claim Denial: Disputes may arise when an insurance carrier denies a claim based on policy exclusions or specific language in the policy. Policyholders may challenge the denial, arguing that the carrier’s interpretation of the policy is incorrect or that the exclusion should not apply in their situation.
• Scope of Coverage: Litigation may result from disagreements over the scope of coverage provided by the policy. This can include disputes over whether the policy covers a particular incident or whether the policy limits are sufficient to cover the damages sought.
• Duty to Defend: Policyholders may sue their insurance carrier for failing to fulfill their duty to defend against a claim, which can lead to disputes over the insurer’s responsibility to pay for legal defense costs and whether the insurer acted in bad faith.
• Late Notice: Disputes can arise if the policyholder provides late notice of a claim to the insurer and the insurer denies coverage. Policyholders may argue that the late notice did not prejudice the insurer’s ability to defend or settle the claim.
• Rescission of the Policy: Insurers may attempt to rescind a policy if they discover material misrepresentations or omissions in the policy application. Policyholders may challenge the rescission, arguing that the misrepresentations were not material or that the insurer knew the facts when the policy was issued.

We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path to seek appropriate remedies.

To determine whether your unique situation may necessitate litigation, please contact our office to set up your initial consultation.

What measures should an insurance carrier take to minimize the risk of litigation over professional liability insurance? 

To successfully mitigate the risk of litigation over professional liability insurance in insurance procurement and coverage matters, an insurance carrier should:

• Clarify Policy Language: Ensure policy language is clear and unambiguous to minimize disputes over coverage and exclusions. This includes using industry-standard terms and definitions and providing examples of covered and non-covered incidents.
• Thorough Underwriting: Conduct thorough underwriting to accurately assess the risks associated with each policyholder, which can help prevent disputes over policy rescission or misrepresentation.
• Prompt Communication: Maintain open lines of communication with policyholders and promptly respond to inquiries, requests, and claims. This helps build trust and fosters a positive relationship between the insurer and the policyholder.
• Proactive Risk Management: Offer policyholders risk management resources, such as educational materials, webinars, and best practice guidelines, to help them understand their risks and how to mitigate them, which can ultimately reduce the likelihood of claims.
• Fair Claims Handling: Ensure that claims are investigated, evaluated, and resolved fairly and promptly. This includes providing a clear explanation of coverage decisions and offering policyholders the opportunity to discuss their claims with a representative of the insurance carrier.
• Monitor Industry Trends: Stay informed about legal and regulatory developments in professional liability insurance to ensure that policies and procedures remain compliant and up-to-date. This can help reduce the risk of litigation stemming from regulatory changes or new legal precedents.

What must be proven to file a lawsuit regarding professional liability insurance successfully, and what are common legal defenses to those claims? 

A typical scenario involving litigation between insurers and policyholders is when an insurer fails to pay (or otherwise undervalues) a claim. Plaintiff policyholders must satisfy the following requirements for a breach of contract claim:

• Existence of a valid insurance policy covering the plaintiff’s conduct;
• Covered loss or damage occurred during the policy period;
• Compliance with policy conditions, such as providing timely notice and proof of loss; and
• The insurer failed to pay the claim or undervalued the claim in violation of the policy terms.

Common legal defenses against professional liability insurance claims include:

• Policy Exclusions: The insurer argues that the loss or damage is excluded from coverage under the policy terms.
• Late Notice: The insurer claims that the policyholder failed to provide timely notice of the loss, as the policy requires.
• Misrepresentation or Concealment: The insurer alleges that the policyholder misrepresented or concealed material facts when obtaining the policy or submitting the claim.
• Failure to Mitigate Damages: The insurer contends that the policyholder did not take reasonable steps to minimize the damage after the loss occurred.

To see what actions or defenses may be available for your unique situation, please contact our office to set up your initial consultation.

Frequently Asked Questions

What is the difference between professional liability insurance and general liability insurance?

Professional liability insurance covers claims arising from professional services, such as negligence, errors, and omissions. General liability insurance covers claims related to bodily injury, property damage, or personal and advertising injury caused by the insured’s business operations.

How do I determine the appropriate amount of professional liability insurance coverage for my business?

Consider factors such as the size of your business, the industry you operate in, the potential financial risks, and the standard of care required in your profession. Consulting with an insurance agent or broker can help you make an informed decision.

Can I be held personally liable if my business has professional liability insurance?

While professional liability insurance protects your business from financial losses due to negligence claims, it may not cover personal liability. Depending on the structure of your business and the nature of the claim, you could still be held personally liable. Consult with an attorney for advice on your specific situation.

Have more questions about a professional liability insurance-related situation?

Crucially, this overview of professional liability insurance does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain a tireless advocate every step of the way. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to set up a consultation.

Here are some blogs written by JB attorneys that provide more information about professional liability insurance:

• An Insurer’s Duty to Defend the Insured (jimersonfirm.com)
• Benchwarmer Effect: The Sobering Reality of Coblentz Agreements (jimersonfirm.com)