Professional liability insurance protects businesses.

• Author: Sergeant, Deborah Jeanne
• Position: INSURANCE

Liability is inherent to businesses that provide a service to clients. Professional liability insurance offers protection when things go wrong. You may not think your business needs liability insurance; however, when you're faced with a claim is not the best time to find out.

Randy Pugh, president and CEO of Alaska USA Insurance Brokers in Anchorage, calls professional liability insurance "the only thing that can give business owners peace of mind regarding their professional exposures.

"You have to look at insurance as a book with a bunch of different chapters," he added. "Some chapters cover certain types of risk. You've got to make sure that if your business has a professional exposure to risk where your assets are liable, you want to at least investigate having professional liability."

WHO NEEDS IT?

Pugh has found among those who don't have it and don't know they need it include consultants and architects.

"Most of these types of claims aren't covered in property and casualty insurance," he said. "It's almost impossible to transfer that liability to the builders. You've got to protect yourself. More and more, building contracts are being done on a team basis where they get architect contractors and even subcontractors involved. In the planning stages where you're designing things, you have an exposure."

Clients depend upon professionals to do the job they're hired to do.

"A lawyer might not get a case filed in a timely manner and exceed the statute of limitations," said Paul Houston, president of CHI Alaska, as an example. "There could be financial damage to the client."

Angela Pobieglo, vice president with Business Insurance Associates in Anchorage, said some business owners who need professional liability insurance "have no idea that this is a coverage they should probably have."

From her experience, the most common entities to forgo coverage are trade schools.

"The premise of professional liability is that it covers an error or omission you make if you work with your brain and not your hands," Pobieglo said. "Since teachers mostly teach intellectually, the chances of a professional liability is so much greater that general liability."

For example, a student of a dance school could allege the instructor taught a dance move improperly and the repetitive use of the improper technique caused a student to hurt herself. If a student were to become injured because of a faulty balance bar at the studio, that would be a general liability...