What Isn’t Covered By Your Professional Liability Insurance?

While it is important to manage your risk through a purchase of professional liability insurance, it is also important to remember lawyers and accountants in practice face other potential risks beyond “just” claims of professional negligence. And most of these risks are not covered by standard professional liability policies.

One of these risks is costs associated with disciplinary action against you or one of your colleagues in your firm. Most professional liability policies—including those offered through Protexure—do provide coverage for and assistance in hiring representation to help you respond to disciplinary complaints or appear at disciplinary hearings. But they cannot lawfully provide indemnification for any fines or other discipline levied against you, nor are they designed to cover consequential losses arising from business interruption should someone in your office face disciplinary suspension. (Although, most professional liability insurance policies do include some set daily amount to help defray revenue lost while you attend proceedings related to professional liability claims or disciplinary complaints made against you or your firm.)

In this same vein, malpractice insurance will not provide coverage for indemnity arising from gross negligence, recklessness, or any sort of intentional harm, or for any criminal conviction of any sort.

Beware, too, that voluntary indemnification agreements will most likely fall outside the parameters of any malpractice policy you may have in place, especially if they are not disclosed to the carrier ahead of time. This is particularly significant if you are purchasing a practice from an accountants or attorney who is retiring or otherwise leaving practice, for instance; make sure that your succession agreement speaks to how any outstanding liability or potential liabilities will be addressed. Likewise, you should not plan to look to your professional liability insurance to help you pay for any sort of guarantee you may offer clients as a business incentive.

Of course, law practices and accounting firms, like any business, face other types of potential risks, like premises or property risks, advertising liability, employment practices risks, workers’ compensation risks, and business interruption risks arising from reasons other than professional discipline or professional malpractice actions. Failure to consider and address these risks through other insurance and risk management activity can negatively affect your ability to fully serve your clients, ultimately raising your malpractice risk overall, a potentially vicious circle you would do well to avoid.