Managing Risk

Professional or General Liability Insurance:  What’s the difference?

In simplest terms, general liability insurance covers claims for bodily injury or property damage for which you are legally liable.  Professional liability covers claims for economic loss caused by errors or omissions in carrying out your professional duties.  You might think of it as physical damages as opposed to financial damages.

While your clients may drive the purchase of either or both coverages, it is important to understand the value of insurance in managing your business.  Insurance is a risk management tool whereby you transfer risk of potential financial loss to an insurance company that mitigates it in exchange for the premium paid.  Both types of insurance are designed to help you manage that risk.

General Liability:
Primary coverages under this policy are for claims of bodily injury and property damage to a third party arising from your services, premises, or operations.  If you rent or lease office space, general liability coverage is usually a requirement in your lease.  If you cause injury to another person or damage to someone’s property in the course of your business, your general liability policy would respond.

A general liability policy also includes coverage for personal and advertising injury (libel, slander, defamation), fire legal liability or liability for damage to premises rented to you, and medical payments coverage (reimbursement up to a limited amount, maybe $10,000 or $15,000, without regard to liability, for injuries sustained by an accident under conditions stated in the policy).

A general liability policy does not cover intangible property (for example, electronic data), economic harm, loss of use of impaired property, product recall, or professional services.

For a real estate appraiser, potential general liability claims could include injury to any visitors to your premises, such as those that result from slips and falls, icy sidewalks, etc.; bodily injury or property damage that occurs while you are inspecting a property you are appraising; infringing on someone else’s copyright, slogan, or proprietary information.

Professional Liability or Errors and Omissions: 
Your E&O policy responds to claims for financial harm or damages to another person or entity that result from errors or omissions in professional judgment, analysis, etc.

To be more precise, an excerpt from the insuring agreement of an E&O policy:  “The Company will pay on behalf of the Insured all sums … which the Insured shall become legally obligated to pay as Damages and Claims Expenses resulting from Claims first made against the insured during the Policy Period or Extended Reporting Period … as a result of a Wrongful Act by the Insured or any entity for whom the insured is legally liable …”

Your E&O policy goes on to outline the conditions that must be met for the policy to respond and what is not covered (found in the policy exclusions).

Typical errors and omissions claims filed against appraisers relate to analysis and conclusions (over- or under-valued), choice of comparable properties, errors in measurement, errors in detailing property characteristics (zoning, right of ways, restrictive uses, past uses), even mathematical calculation errors.

Summary:
In short, you can think of a general liability as the type of policy that applies to any kind of business operation, whereas professional liability applies to those professions or pursuits that require specialized knowledge or training.

Some appraisers carry only those coverages required by their clients, which are often minimum limits.  Others look at the level of risk they are willing to absorb, and seek coverages that match their risk. Whatever you choose to do, you should have a solid understanding of the various ways to protect your business.

This article is intended to be a brief comparison of the two coverages and not a comprehensive review of the policies.  Insureds should review their specific exposures and coverages with their insurance agent.

Have content of your own that you would like to submit? Email comments@appraisalbuzz.com.

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About Elaine Matternas

Elaine Matternas
Elaine Matternas oversees Intercorp’s Real Estate Appraisers Professional Liability Program, now in its 22nd year. In that role, she has spoken and written on topics such as risk management for appraisers, file documentation, responding to claims and disciplinary actions, analysis of claim trends, and many other issues relating to appraiser liability. She was a journalist and magazine editor before entering the insurance field. Intercorp is a program manager and wholesale brokerage firm specializing in professional liability (primarily real estate related classes), and environmental liability. We invite your comments or feedback at appraisers@intercorpinc.net, or 800-640-7601.

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