General Liability Insurance and Professional Liability Insurance are both important components of Small Business Insurance.

But which policy addresses the risks your clients face?

Here’s how you can tell the difference.

General Liability covers a Physical Incident

It protects your client’s business against a few general lawsuits that any business could face.

Essentially, it kicks in when a third party (anyone who doesn’t work for the business) sues for:

  • Bodily or personal injury on company property

  • Damage your client’s company caused to their property

  • Advertising injuries

    • Slander and Libel- spoken or written defamatory statements

    • Misappropriation- unauthorized use of information

    • Copyright infringement

Examples:

  • Third Party Bodily Injury If a person is injured on business property, they may make a bodily injury claim against the business. For example, a package delivery man trips on loose carpeting in your client’s accounting office, falls and breaks his wrist. General Liability Insurance can help cover the costs of the bodily injury claim he makes against your client’s business for this accident.

  • Third Party Property Damage If your client or someone on their payroll damages a third party’s property, they may face a property damage claim. General Liability Insurance can help cover the costs of property damage claims made against your client’s business. For example, an employee using equipment on your client’s business property accidentally damages the neighboring business’s office. The neighboring business makes a property damage claim against your client’s business. General Liability Insurance can help cover the costs to settle this property damage claim.

  • Advertising Injury General Liability Insurance can help cover the costs of a claim made against your client’s business because of its advertising practices. For example, a business in the same industry as your client’s makes a claim that your advertising looks too similar to theirs and is infringing on their business. General Liability Insurance can help cover the costs your client’s business will incur to deal with this claim.

Professional Liability Insurance aka Errors and Omissions (E & O) covers a Financial Incident

Even if your client is an expert in their business, they may make a mistake And if their customer thinks the mistake impacted them financially, your client may be sued. Professional Liability Insurance covers the cost of negligence as it applies to the professional service your client provides.

It covers the claims of:

  • Errors in professional services your business provided

  • Failure to uphold contractor promises

  • Incomplete work or work not done to expectations

  • Mistakes and omissions in professional work performed

  • Negligence

  • Misrepresentation

  • Violation of Good Faith and Fair Dealing

  • Inaccurate Advice

  • Privacy Violations (depending on the claim)

Example:

If you are an accountant or bookkeeper and make a clerical error that costs a client thousands of dollars or if you work as a photographer and accidentally damage a client’s wedding photos – claims in these situations could have costly legal repercussions. Professional liability insurance will help cover the costs and fees associated with resolving such incidents, including legal fees and damages awarded.

FAQs:

Who needs to have Professional Liability Insurance? Many types of businesses need professional liability insurance. In some states, certain kinds of professional practices are required to have professional liability insurance. In other cases, a client may require a business to have professional liability insurance as a condition of a contract to do work. If you work directly with customers by providing services, consider a professional liability policy. A customer or client can sue even if you have done nothing wrong, so the protection can give you piece of mind.

If you have any additional questions, please contact Robin Leckner in our commercial lines department at 847.631.6658 or commercial@midwestga.com