Professional liability is simply a responsibility. Whether you are a professional bookkeeping advisor or you offer professional services you are making a general agreement with the public to act in a responsible way. Defining what is expected of a professional is a bit like nailing jello to a wall. It is described in the law as using ordinary care. The law expects you to act on behalf of your clients in a manner that you would find fitting in matters of importance to yourself. The slippery nature of liability does mean that your chances of being involved in legal matters are higher but proving that you were negligent is a bit more difficult.
Examples of Liability
In our first example, let’s say that you make gloves. Now, in the ordinary course of business the chances that you would be accused of negligence are somewhat low. There is still a chance that a consumer might try and blame your product for harm but it would be pretty hard to do. In our second example you offer financial planning services. Now, with the glove salesman there is something tangible and clear cut in the relationship with the consumer. With a financial planner, their advice and education guide them to recommend strategies to grow a person’s wealth. What if that strategy fails? If that customer can prove that the financial planner was negligent in their recommendations, they would have grounds for a lawsuit.
Here we begin to see the slippery definition of professional liability pertaining to legal matters. If a financial services company is recommending a stock that they have a personal stake in and that stock tanks, there is probably a case to be made that the company was negligent and possibly criminal in their advice. If they tell their customers to buy a stock based on good information but for some unknowable reason the stock falls, that is just the perils of investing. One of the most important things to remember when it comes to legal issues pertaining to professional liability is that anyone can start a lawsuit. The legal system will generally weed out questionable suits but defending yourself up to that point can still cost a pretty penny.
Professional Liability Insurance
Professional indemnity insurance, otherwise known as E&O, or Errors and Omissions insurance, is an insurance policy that covers you in just such cases. When you have this type of insurance you can get your insurer involved. Insurance companies employ legal teams specifically to fight these types of cases. This can save you a lot of money. This is the ideal way to confront the risks facing professionals. You get the comfort of knowing that you have an experienced legal team on your side and you don’t have to fight liability claims on your own in an arena that you are not trained in.
Professional liability is a sticky topic. When it comes to the legal responsibilities that a professional holds it is important to remember that appropriate insurance is your best weapon. Good record keeping, responsible protocols, and educated & trained staff members are other great ways to avoid problems in the first place.
The legal side of professional liability is complicated. Your focus needs to stay on the well being of your customers and your company. Let your professional liability insurance company focus on the legal side of these issues. Hopefully, you will never have to file a claim but even if you do, you will have an experienced partner to do the heavy lifting for you.