What Is Professional Liability on a COI?
You're reviewing a certificate of insurance from a new vendor when you spot "Professional Liability (E&O)" listed under coverage types. Your first thought? What exactly is this, and do I need it? You're not alone if professional liability coverage feels confusing.
Here's the straightforward answer: professional liability insurance (also called errors and omissions insurance) protects service providers when their work advice or recommendations cause financial harm to a client. Unlike general liability insurance that covers physical accidents, this coverage addresses mistakes in judgment or failure to deliver promised results.
What Is Professional Liability on a Certificate of Insurance?
Professional liability insurance covers claims arising from the actual work someone performs, not the physical risks of doing that work. When a consultant gives faulty advice that costs you money, or an architect's design error requires expensive corrections, professional liability insurance protects them from the financial fallout.
On a COI, this coverage confirms that if their recommendations fall short, they have resources beyond their bank account to make things right. Still wondering if a COI is the same as liability insurnace? Read our blog.
How Does Professional Liability Show Up on a COI?
Look for these common labels: "Professional Liability," "Errors & Omissions (E&O)," or "Professional Liability/E&O." You'll see coverage limits (like $1,000,000 per claim), the insurance company providing coverage, policy number, and effective dates.
What Is Another Name for Professional Liability Insurance?
Errors and omissions insurance (E&O) is the most common alternative name. They're functionally identical: both protect professionals from claims related to work performance rather than physical accidents.
You might also see profession-specific versions, like medical malpractice insurance for healthcare providers. These are specialized forms of professional liability insurance tailored to specific industries.
What Does Professional Liability Insurance Cover?
This professional liability insurance policy steps in when someone claims your vendor's work caused them financial loss. That includes professional negligence, missed deadlines that cost money, inaccurate advice that led to poor decisions, or failure to deliver promised results.
Coverage includes legal defense costs, settlement payments, and court judgments. Even if a claim is baseless, the insurance company handles the legal fees, which can run into six figures.
What's the Difference Between Professional Liability and General Liability?
General liability insurance covers physical risks: someone trips over equipment and breaks their arm (bodily injury), or work damages your building (property damage). Professional liability covers mental work: bad advice, design errors, or professional missteps that cost money but don't cause physical harm.
Most service-based vendors need both types of liability insurance. General liability handles "slip and fall" scenarios, while professional liability handles "your recommendation cost us $50,000" scenarios.
What Are the Two Types of Professional Liabilities?
Professional liabilities are split into errors (doing something incorrectly) and omissions (failing to do something required). An error might be an accountant miscalculating taxes. An omission might be forgetting to file a required form. Both trigger the same professional liability policy.
What Are Common Professional Liability Claims?
The most frequent professional liability claim types involve design errors requiring expensive corrections, advice that leads to financial losses, missed deadlines that cost money, and failure to meet contractual obligations.
According to insurance industry data, the average professional liability insurance cost for claims ranges from $50,000 to several million dollars, making this coverage crucial for both vendors and clients.
Which Types of Vendors Need Professional Liability Insurance?
Any vendor providing advice or specialized expertise needs professional liability insurance. That includes consultants, architects and engineers, IT service providers, marketing agencies, accountants, designers, and real estate professionals.
If you're unsure whether a vendor needs professional liability insurance, ask: If their advice is wrong, could that cost us money beyond just redoing the work? If yes, request this coverage.
What Should I Look for When Reviewing Professional Liability on a COI?
Start with coverage limits that match your contract value. Most contracts require $1-2 million per occurrence as a baseline. Verify the policy is active throughout your project timeline and covers the specific professional services they're providing.
Check that your company is listed as additional insured if your contract requires it, and confirm policy dates align with your project schedule.
How illumend Makes Professional Liability Tracking Simple
Managing professional liability insurance coverage requirements across multiple vendors gets complicated fast. illumend, powered by myCOI, empowers you to set coverage requirements once, then automatically track compliance for every vendor relationship.
Request coverage through one-click vendor invites; no portals required. Lumie™ explains requirements in plain language, and the platform alerts you proactively if coverage lapses. With 15 years of insurance compliance expertise built in, you get confident answers without becoming an insurance expert yourself.
Discover how illumend simplifies professional liability tracking for your entire vendor network.
