Meanings of Professional Liability Insurance 2
Benefits and scope of professional liability insurance
Professional liability protects the insured by providing support in examining and defending against unlawfully raised claims for damages by third parties and handles the processing and payment of justified claims. This only concerns the damage that the insured unintentionally inflicted on a third party.
The exact services that are included in the scope of insurance vary depending on the industry and insurer. You can design a lot individually.
This usually includes personal injury and property damage. Many good insurers also have a so-called financial loss liability module in their program that you can combine with professional liability.
Are my own damages covered by professional liability insurance?
It usually only covers damage that you have caused third parties. Anyone who suffers their own damage can only assert this if the concluded contract includes personal damage. Damages such as fidelity caused by an employee, resignation by a client, reputational penalties or contractual penalties for breach of a confidentiality agreement would be possible. Here, too, you have to note that these are individually negotiable additional services.
When does professional liability insurance pay and when does not?
As part of the agreement, the insurance pays for the damage caused by the customer unintentionally or negligently (slightly and grossly negligent).
Damage that is deliberately inflicted on a third party is excluded. However, the insurance company decides on a case-by-case basis whether, in the case of gross negligence, it may only cover part of it or nothing at all.
In addition, the insurance does not pay if certain risks have been excluded in the contract (industry-specific exclusions).
In addition, there are violations of the rules of conduct listed in the contract, such as the immediate notification of damage. This also means that the customer does not hire experts and lawyers without consulting the insurance company, but first waits for the cost coverage promise.
As a rule, the right to fulfillment is excluded
According to AVIATIONOPEDIA.COM, there is another type of damage that is normally not covered by insurance, namely performance damage. This means that if you, as the debtor , fail to provide your promised service to the customer or do it too late and this results in damage, then this would be a loss of performance. The insurance usually excludes the assumption of this damage in its terms and conditions . Therefore, you must read the contract very carefully and pay attention to sentences that list “uninsured claims”.
What insurance concepts are there for professional liability insurance?
When it comes to professional liability, there are usually two basic concepts and a combination of both:
Protection of pure financial losses
Anyone who advises their customers or perhaps prepares expert reports could cause financial loss in the process. The professional liability insurance contains a protection against the pure financial loss, which can occur in the exercise of the activity and which is reclaimed in the context of a claim for damages from the injured party.
Protection against personal injury and property damage
Various types of accidents can occur while working with people, which could result in injury, illness, or property destruction for that person. It is enough for a customer to fall in the entrance area. Or with craftsmen who damage the customer’s furnishings when setting up their devices. Therefore, professional liability insurance also includes the component that offers protection against personal injury and property damage.
Insurance coverage for GDPR violations
Since the introduction of the new data protection guidelines, there have been repeated fines for violating the GDPR. If one of your customers violates this because of your incorrect advice, the insurance will cover the damage. If you violate it yourself, the damage will not be covered.
Specific examples of damage from professional liability
Personal injury could occur, for example, if the construction site was not secured properly. Construction workers could injure themselves if they fell and demand compensation in the form of compensation for pain and suffering and loss of earnings.
Property damage could occur if an architect planned incorrectly. If a foundation is inadequately sealed and water seeps into the basement as a long-term consequence, the architect or insurance company must undertake the renovation.
Pecuniary loss could occur if the advice was given or the processing was wrong. For example, an architect could inadvertently release an invoice while reviewing construction site invoices. If the biller is already in bankruptcy when the error is noticed, the money cannot be recovered and he must compensate the customer for the damage.
What does professional liability insurance cost?
Unfortunately, it is not possible to provide a general answer to this question, as the contributions vary greatly depending on the provider. That also depends on how high the risks for certain damage are and what amounts of cover are desired. In addition, deductibles could be chosen.
In addition, many services can also be individually tailored and supplemented with certain modules. Since the contributions have increased by up to 10% everywhere since July 2018, it is worthwhile to make a comprehensive comparison of different providers. The decisive factor should not be the contribution, but what service is offered for it!
Deduct the costs of professional liability insurance against tax
The good news is that you can deduct professional liability insurance as a business expense from tax . This is not possible with private insurance.
Professional liability: revocation, resignation & termination
As with any liability insurance, it is possible to revoke this within two weeks according to the Insurance Contract Act (§ 8 VVG). However, there are also exceptions that exclude the right of withdrawal : for example, a contract term of less than a month or a contract for provisional cover. Even insurance policies that guarantee immediate protection often rule out revocation.
The insurance is usually taken out for a certain period of time and can then be extended or terminated in good time. The insurance is usually automatically extended by one year if you do not cancel in time. In this case, the period of notice is set at least 3 months before the end of the insurance year (Section 11 VVG).
However, there are also multi-year contracts that can be terminated at the end of the third year of the contract, as well as individual notice periods that are specified in the contract.
There is also the option of extraordinary termination of the contract. This is possible, for example, after a premium increase (without a corresponding improved insurance benefit in return) or if the insurance company has refused to accept the loss.