Businesses that provide professional services require liability coverage, and some professions have access to programs tailored specifically to their industry, such as architects, engineers, lawyers, and legal professionals, medical professionals, and contractors. For many other categories, the effective solution is miscellaneous professional liability.
Understanding Miscellaneous Professional Liability Insurance
Miscellaneous professional liability (MPL) provides a safety net for a wide array of businesses offering a kaleidoscope of specialized services or advice in business sectors such as advertising, marketing and public relations, graphic design, real estate, property management, bookkeeping and tax preparation, expert witnesses, notary public, event planning, computer and software services, and many more.
Unlike general liability insurance, which covers physical injuries and property damage, MPL covers errors, omissions, and negligence that may happen in the course of providing professional services.
MPL insurance typically covers the following:
- Legal Defense Costs: If a client sues a business for alleged errors or negligence, the insurance covers the legal fees, even if the claims are unfounded.
- Settlements and Judgments: If the court rules against a business, the insurance helps cover the settlement or judgment costs.
- Errors and Omissions: If a business is alleged to have made mistakes, oversights, or failed to deliver services as promised, the insurance provides legal defense.
- Negligence: If a business is found to be negligent in its professional services, the insurance provides protection.
Who Needs Miscellaneous Professional Liability Insurance?
Between increasing instances of litigation and changing contractual requirements, more and more businesses are reexamining their insurance needs to ensure that their MPL policy includes sufficient coverage for potential exposures.
For a business owner whose firm employs several professionals, the need for professional liability insurance may be more evident, if not required under the terms of contracts such as business loans and leases. For solo operators, however, the need for (and benefits of) coverage may be less obvious. Here are some questions about the services offered that can help determine whether miscellaneous professional liability insurance is required.
Does the business engage in any of the following activities:
- Provide services or offer professional advice to others for a fee?
- Provide services to a client that are then incorporated into the client’s end product or service?
- Hire, manage, or supervise subcontractors on behalf of a client?
- Have access to a client’s proprietary business information as part of a service agreement?
- Sign contracts requiring the business to carry professional liability insurance?
MPL IRL: Real-World Coverage Scenarios
To see how miscellaneous professional liability insurance offers protection in specific situations, let’s look at potential scenarios for tax preparers. Tax preparation is a professional service that’s in high demand, frequently offered by solo practitioners, and calls for a high level of specialized education, training, expertise, and professional certification.
What happens when tax preparers face legal issues resulting from unintentional mistakes or oversights, rather than intentional fraud? The following scenarios all may trigger coverage under an MPL policy.
Mathematical errors and misclassifications: Accuracy and precision are critical for tax preparers, but mistakes happen. For example, a tax preparer might accidentally input the wrong numbers or misclassify business expenses that lead to incorrect tax liabilities. When the IRS recalculates the taxes owed, the resulting bill may include penalties and interest on the underpaid amount.
Misinterpretation of tax laws: Tax laws are complex and subject to frequent changes. A misinterpretation or oversight in compliance with a recent statutory change can lead to out-of-pocket costs for a tax preparation client.
Failure to include all income: Sometimes, preparers inadvertently fail to include all sources of income provided by the taxpayer. Maybe the taxpayer doesn’t provide all necessary documentation, or the preparer overlooks certain forms. Omissions can lead to underreported income, triggering IRS audits and additional tax assessments.
MiniCo’s Professional Liability Insurance Expertise
The rise in service-based businesses has driven the need for professional services insurance, with the global professional liability insurance market projected to reach approximately $435.3 billion USD by 2032. Sectors like healthcare, legal services, consulting, architecture, and engineering are seeing an increased demand for coverage to mitigate financial risks associated with errors and omissions. There is also a growing trend in the service-sector economy, so more professionals and businesses are looking to obtain miscellaneous professional liability insurance to protect against potential claims and financial losses.
A recognized leader in the insurance industry, MiniCo is known for extensive expertise in providing specialized insurance solutions for a wide range of professional liability exposures. MiniCo’s exclusive Miscellaneous Professional Liability program offers a schedule of professional services crafted for each risk, including duty to defend, bilateral extended reporting period, spousal liability, regulatory/administrative actions reimbursement, and more. Contact us for program details or to get a quote.
