Professional liability insurance, which is sometimes called professional indemnity insurance or abbreviated as PLI, is a type of insurance that protects those that provide services or guidance against the cost of defending themselves in cases where a client claims them negligent. Depending on the type of PLI coverage, the policy holder may cover defense costs, but it never protects the holder from criminal prosecution. In what follows, you'll learn more about the way professional liability insurance works.
The reason that professionals need PLI is that most liability insurance policies only cover instances of physical injury, damage to one's property and false claims. For certain professions, such as many health professions, legal claims can arise without any of those types of circumstances taking place. The most common types of claims made that are related to professional liability insurance include negligence, misrepresentation or violations of good faith. Most policies are set up on what's called a claims-made basis, which means that the insurance will only cover claims made on instances in a given time window of the policy. This may seem intuitive, but it can lead to problems when one makes a claim based on an incident that occurred prior to the policy being taken out, which can often happen years after the initial interaction. However, some professional liability insurance plans provide a retroactive date of coverage, which can be a boon to some professions, primarily doctors and other medical professionals. Some professional liability policies cover instances of defamation like slander and libel, as well as intellectual property, breach of warrant and breach of contract claims, but these are usually attachments to a policy rather than standard elements of a PLI policy. Thus, it should be clear that a PLI policy is a necessity for certain professions, and if you need one you should get it as soon as you can!