Define Professional Liability Insurance.
It is a specie of a liability insurance which seeks to indemnify an Insured against a third party claim by reason of an allegation or actual commission of an error and omission while in the performance of a professional service. Hereunder are some examples:
Define Professional Services.
Professional services are those that involve specialized knowledge, skill or labor, which are primarily mental or intellectual as opposed to physical or manual. The nature of the act is determinative of the professional service as opposed to the insured’s occupation or title (for example, mopping a floor does not become a professional service merely because a doctor does the mopping).
The application of these principles can be challenging. For example, while it is readily understood that doctors, lawyers and engineers should be insured under an E&O policy, what about electricians? They have specialized knowledge with a recognized course of study and also need to be licensed in most jurisdictions. Do their services meet the concept of a specialized skill such that they are providing professional services?
Notwithstanding the specialized skill, it is likely the services provided by an electrician would be primarily physical or hands-on in the completion of their work, and as such, not fall into the intellectual component. These insurance exposures would be better covered under a CGL policy, especially under the products and completed operations sections. (Source: Michael Mallet. (October 1, 2014). E&O & CGL: Let’s Work Together Retrieved from https://www.canadianunderwriter.ca/features/e-o-cgl-lets-work-together/)
Differentiate Professional Liability Insurance from D&O Liability Insurance.
The following are the main differences between Professional Liability Insurance and a D&O:
It is a specie of a liability insurance which seeks to indemnify an Insured against a third party claim by reason of an allegation or actual commission of an error and omission while in the performance of a professional service. Hereunder are some examples:
- In the case of lawyer, he may incur liability by failing to timely file a pleading or failure to handle the case properly.
- In the case of accountants, failure to make the appropriate advice to clients leading to a tax penalty.
- In the case of an insurance broker, failure to include in the policy a coverage requested by the client or failure to handle his client’s claim leading to the denial thereof.
Define Professional Services.
Professional services are those that involve specialized knowledge, skill or labor, which are primarily mental or intellectual as opposed to physical or manual. The nature of the act is determinative of the professional service as opposed to the insured’s occupation or title (for example, mopping a floor does not become a professional service merely because a doctor does the mopping).
The application of these principles can be challenging. For example, while it is readily understood that doctors, lawyers and engineers should be insured under an E&O policy, what about electricians? They have specialized knowledge with a recognized course of study and also need to be licensed in most jurisdictions. Do their services meet the concept of a specialized skill such that they are providing professional services?
Notwithstanding the specialized skill, it is likely the services provided by an electrician would be primarily physical or hands-on in the completion of their work, and as such, not fall into the intellectual component. These insurance exposures would be better covered under a CGL policy, especially under the products and completed operations sections. (Source: Michael Mallet. (October 1, 2014). E&O & CGL: Let’s Work Together Retrieved from https://www.canadianunderwriter.ca/features/e-o-cgl-lets-work-together/)
Differentiate Professional Liability Insurance from D&O Liability Insurance.
The following are the main differences between Professional Liability Insurance and a D&O:
- The former, as general rule, covers liabilities arising from the performance by the insured of a professional service, whereas, the latter cover management liabilities arising from the directorship of the insured.
- The former’s coverage extends to non-director and key officers, whereas, the latter is extends cover in favor of directors and key officers only.
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