Professional Liability Insurance – A Comprehensive Guide For Canadian Businesses
Over the past few years, a handful of Canadian businesses have been sued for substantial amounts of money, due to negligent actions or inadequate work. In some cases, the business made a simple mistake and that mistake quickly compounded and spiraled out of control with haste. Before they knew it, a lawsuit was filed against the company and they were forced to contend with the idea of bankruptcy. PLI Insurance is one type of professional liability insurance, which can help you avoid this type of scenario. It may not protect your business in all situations, but it is another safeguard and an additional barrier of protection.
Within this comprehensive guide, you will learn about the importance of professional liability insurance for Canadian businesses.
A Basic Understanding
Before trying to get a grasp of the sophisticated details of PLI insurance, it is best to familiarize yourself with the basics. This specific type of coverage is specifically designed to protect Canadian businesses from claims made due to negligent actions or inadequate work. In the event of a lawsuit and damages, your business will be covered for the court costs and any settlements against your company. However, it is essential to remember that each insurance policy or contract will have a certain maximum limit. The insurance company will provide you with the maximum amount and no more.
Nonetheless, PLI insurance could prevent your business from being forced into bankruptcy.
Who Needs (PLI) Professional Liability Insurance?
Not every single business in Canada will need PLI Insurance. Canadian financial advisors, investment advisors, and insurance brokers commonly obtain this type of insurance, since they’re at a high risk of being hit with such a lawsuit. This type of insurance is very common amongst data processors, travel agents, market researchers, and even bookkeepers. If there is a possibility that your business will be held accountable for a client’s financial loss, you will definitely want to acquire PLI insurance.
Companies, which are responsible for managing a third party’s finances or investments, will find that PLI insurance is a necessity!
When it comes down to it, even the strictest and most professional businesses in Canada could be hit with a lawsuit at some point or another. Sometimes, litigation is initiated by an unhappy client. Other times, a third party may feel that your company’s actions or inactions led to their devastating loss. Both situations can result in a lawsuit. Although you and your attorneys may feel that the claims are frivolous, going to court will prove to be immensely costly. Not only will you be forced to step away from the office, but you’ll also be required to pay outrageous fees for your defense.
The PLI insurance will help to cover these costs, so your business doesn’t go under, due to a frivolous lawsuit. And, it should be known that some clients will actually require your company to have PLI insurance, before they agree to work with you.
At this point, you may not see the importance of Professional Liability insurance. Well, if you are responsible for selling a piece of property for a third party, you could be held liable, if the third party isn’t happy with the generate revenue. An auctioneer may be hired to auction off a piece of real estate for the client. If the client’s revenue doesn’t meet their expectations, they may very well take out their frustrations on the auctioneer. This could result in the auctioneer being sued for insufficient advertising of the auction.
The auctioneer could lose out substantially just by being drug through a major lawsuit. And, there is always the possibility that the Canadian court may find that the auctioneer owes the client, due to their insufficient services. In this type of scenario, the PLI insurance would cover the defense costs, as well as the damages awarded to the third party.
Cost Of Materials
In some situations, Canadian businesses may be responsible for advertising a third party’s upcoming event. If your company has agreed to market an event for another company, you’ll want to make sure everything is perfect on the first attempt. If something is out of place or inaccurate, additional advertising flyers and materials may be required and your company could be held liable for the costs. As an example, your company may be responsible for making the public aware of an upcoming speaking event for your client. If you send out brochures, which fail to identify each and every speaker or that have inaccurate information, you will need to send out more.
The third party entity could sue your company in an attempt to regain the money spent on additional advertising materials. Again, the insurance would cover your company’s defense as well as any settlements against your company.
Your History Matters
It is absolutely essential to remember that each Canadian company is different. While some companies have a spotless history, others have run into problems repeatedly in the past. This will play a major role in the specific type of PLI insurance policy you’re able to claim. If your company has a flawless reputation, it is highly likely you’ll be able to obtain a favorable policy with a low monthly premium. However, if your past is littered with complaints and lawsuits, your policy is likely be much less favorable. You may not be able to acquire a high payout limit or you may be required to pay substantially more each month. Some insurance brokers will not even insure companies, which have faced multiple lawsuits in the past.
When Should You Obtain Professional Liability insurance aka PLI?
When starting a new company, you may not feel the need to acquire such a policy right away. This is a very risky way to proceed. Anytime you work with a client, you are putting your company at risk of being sued for errors. Some clients will actually require your company to have this insurance, before they’ll agree to work with you. However, you should not enter into any type of contract, until you are sufficiently covered! Do not take the risk of entering unprotected or you may lose out substantially.
Unfortunately, Canadian businesses will always take a risk when entering into a contract with a third party. Even the most respectable businesses can wind up on the wrong side of a dispute. Although it is impossible to completely eliminate the risk, there are some things you can do to try and prevent problems from arising. First and foremost, you should always have a written contract for the project. Make sure the contract specifically details the work that will be done and how much will be charged. Secondly, make sure you tell the client verbally what you can do and always maintain realistic expectations. Finally, make sure your company has quality control procedures in place to ensure everything is perfect.
With these tips, you may be able to avoid a lawsuit all together.
Getting covered is genuinely not that difficult and actually there are several ways that you can approach this task. Your best bet will be to complete the free professional liability insurance quote form. This form is simplified to expedite the process and provide premium quotes from several different Canadian insurance providers. You can also speak directly with a licensed insurance agent, if you prefer face-to-face interaction. The important thing is to not delay the task any longer than necessary. The quicker you get covered, will be in your best interest.