As a business owner, you’re likely already aware that you need insurance to protect your bottom line. Business owner’s policies can include a wide range of different standard coverages, from property insurance to commercial vehicle. Liability insurance is non-negotiable as well, but it comes in different forms. Both commercial general liability (CGL) and professional liability insurance (sometimes also called errors and omissions insurance, or E&O) offer critical protection for a business, but they respond to different exposures. The general public and average business owner would be false to assume that commercial general liability covers a business for “everything.”
In fact, there are huge differences between CGL and E&O and what they cover. Technically while every business necessitates having CGL insurance, professional liability is only specific to businesses that offer a professional service or advice. Read on for information about the differences between these popular forms of liability insurance.
Commercial General Liability Insurance
Commercial General Liability, or CGL, is designed to cover businesses for bodily injury or property damage that is suffered by their clients or third-parties due to their business operations. The most common CGL claim is a slip-and-fall suffered by a client attending a business’ physical premise. The client then decides to make a claim against the business and sue for their injuries.
The exact level of coverage you choose for your commercial general liability coverage will depend on your business’ needs, your insurance provider, and your budget. Oftentimes, levels of coverage may vary between $1,000,000 and $5,000,000, with some providers offering up to $10,000,000 in coverage, depending on the nature of your business. This is the maximum amount that your policy will pay out in the event of a claim over a 12-month policy period and may pay out over numerous claims.
Every business needs commercial general liability, even if they already have a professional liability insurance policy in place. This is the most common form of insurance coverage; even if your business doesn’t decide to purchase other forms of coverage, it’s highly recommended you have at least a base amount of CGL coverage in place.
Professional Liability Insurance
Professional Liability Insurance, or E&O/Errors and Omissions, is a type of professional insurance designed to cover businesses for their liability because of errors and omissions they allegedly committed while providing a promised service or advice to their customers. Professional liability insurance is designed to include coverage if non-physical injuries occur or are alleged to occur causing a third party’s financial losses such as omissions, libel, slander, negligent mistakes, and other types of negligence that have been committed or alleged to have been committed as part of your service/advice.
Like CGL, there’s a dollar limit that comes with professional liability insurance and how much of your defense costs it may cover. I.e., if you have a $1,000,000 limit, your business may only have coverage for that amount. Oftentimes, liability lawsuits of a professional nature may see a far higher risk of lawsuit due to the nature of their businesses and so their insurance company may recommend higher limits – in addition to the purchase of a CGL policy for claims of property damage and bodily injury.
Not all businesses need professional liability insurance or E&O, but every business needs commercial general liability. Businesses that may need professional liability insurance include (but are not limited to) the following list:
- Construction Workers
- Financial Advisors
- Forensic Experts
- Finance Professionals
- Health Professionals
- HR Managers
- Legal Advisors
- Media Professionals
- Social Workers
This is not an exhaustive list. If your business offers a professional service or “advice,” it may necessitate the purchase of professional liability insurance.
You can purchase professional liability insurance through a broker or designated PLI provider. Note that professional liability insurance may be required depending on your industry, particularly if you work as a lawyer or a medical professional. Some clients may refuse to work with your business unless you provide proof of professional liability insurance, whether or not your industry necessitates you to carry this form of integral protection. Finally, even if it is not mandatory but you offer a professional service or advice as a business, it’s still highly recommended you purchase PLI! It could be the difference between having to shut your doors permanently and staying open for many years to come.