Professional liability insurance is also known as professional indemnity insurance (PII). It is liability coverage that aids in covering professional advice as well as service-providing companies and individuals from bearing the full financial brunt of having to defend themselves against a negligence claim made by a client and any damages that are awarded in negligence civil lawsuits.

Professional liability insurance concentrates on the supposed failure to carry out on the behalf of, monetary loss caused by and error to omission in the service or product sold by the policy holder. These are actions that have the possibility to lead to legal action that wouldn’t be covered by a more basic liability insurance policy which focuses on more direct methods of harm.

In most cases professional indemnity coverage also allows for defense costs, including when the legal action brought up turns out to be baseless. This kind of insurance does no include criminal prosecution. It also does not include a massive variety of possible liabilities under civil law that are not listed one-by-one in the policy coverage, but which may be subject to particular types of professional practice, and in some cases is necessary under binding legal documentation by other companies that are the direct beneficiaries of the service or counsel.

Professional indemnity insurance could also have varied forms and names in accordance to the profession. In the medical profession, for example, it is known as malpractice insurance, consultants, lawyers and brokers call it errors and omissions (E&O) coverage. Other professionals who usually have need of professional liability include maintenance and contractors, financial and accounting services and transport.

The main rationale for professional liability coverage is that a normal general liability insurance policy will only cover physical harm, damage to property, advertising injury or personal injury claim. Other kinds of insurance protect employers and public and product liability. There are different kinds of professional services and products that can lead to legal claims without any of the enumerated types of harm covered by such policies occurring. Normal claims that professional indemnity insurance covers include, misrepresentation, negligence, violation of good faith and erroneous advice.

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