Professional Liability Insurance (PLI)

Professional liability insurance (PLI) is insurance that protects professionals such as accountants, lawyers, and physicians against negligence and other claims initiated by their clients. Professionals who have expertise in a specific area require this type of insurance because general liability insurance policies do not offer protection against claims arising out of business or professional practices such as negligence, malpractice, or misrepresentation.

Depending on the profession, professional liability insurance may have different names, such as medical malpractice insurance for the medical profession, and errors & omissions insurance for real estate agents. Professional liability insurance is a specialty coverage that is not provided under homeowners' endorsements, in-home business policies, or business-owners' policies. It only covers claims made during the policy period.

Professional liability insurance policies are usually arranged on a claims-made basis, which means coverage is good only for claims made during the policy period. Typical professional liability policies will indemnify the insured against loss arising from any claim or claims made during the policy period by reason of any covered error, omission or negligent act committed in the conduct of the insured's professional business during the policy period. Incidents occurring before the coverage was activated may not be covered, although some policies may include a retroactive date.

Some professional liability policies are worded more tightly than others. While a number of policy wordings are designed to satisfy a stated minimum approved wording, which makes them easier to compare, others differ dramatically in the coverages they provide. For example, breach of duty may be included if the incident occurred and was reported by the policyholder to the insurer during the policy period.

Wordings with major legal differences can be confusingly similar to non-lawyers. For instance, coverage for "negligent act, error or omission" indemnifies the policyholder against loss/circumstances incurred only as a result of any professional error or omission, or negligent act (i.e., the modifier "negligent" does not apply to all three categories, though any non-legal reader might assume that it did). Meanwhile, a "negligent act, negligent error or negligent omission" clause is a much more restrictive policy, which would deny coverage in a lawsuit alleging a non-negligent error or omission.

There are many options for procuring malpractice insurance. In the most basic form, an insurance policy can be purchased for an individual or group by a private insurer.

Like all management and professional liability plocies can be purchased in a claims-made policy or an occurrence policy. A claims-made policy only covers claims if the policy was in effect when the treatment occurred and when the lawsuit was made. An occurrence policy covers any claim that was made on a treatment that occurred while the policy was in effect, even if the policy has since expired.

The types of costs covered under a malpractice policy are wide. They include all legal fees, such as lawyer fees, settlement and arbitration costs, medical damages, and punitive damages.