Professional Liability Insurance in Canada

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Understanding Professional Liability Insurance Regina.

Any business owner can tell you how much hard work and patience it took to get their company off the ground. Whether you’re a huge company or just an up-and-coming small business, professional liability insurance is an integral part of running a business operation.

Not having enough insurance can hurt your business and reputation. When it comes to professional liability insurance, some business owners may not be fully aware of what it is and how it can benefit their company.

Here at EasyCover, we’re dedicated to giving you the best professional liability insurance quotes.


What Is Professional Liability Insurance?

Professional Liability Insurance, also known as Errors and Omissions Insurance, protects you or your business when a client holds you responsible for professional service or advice that they believe didn’t perform as promised.

Many contractors and businesses have Commercial General Liability Insurance, but this type of policy only covers third-party bodily injury or property damage. It does not provide cover for financial damages resulting from services or advice offered in a professional capacity. That’s where Professional Liability or Errors and Omissions Insurance comes into play.

Professional Liability Insurance is different from Commercial General Liability Insurance: they are triggered by different types of losses and the policies are structured differently with respect to how they respond to claims. Most Commercial General Liability Insurance policies are written as an “occurrence” form; whereas Professional Liability Insurance policies are usually written as “claims made” policies.

The industry standard is for insurance companies to offer Professional Liability coverage on a “claims made and reported” form. This means that the policy will only respond to claims made against you and reported to the insurer within the policy term.

The EasyCover Professional Liability Insurance policy follows the industry standard and is written as a Claims Made form, however, we offer an unlimited retroactive date. This means we will respond to new allegations/claims made against you for past work which was done before you purchased your EasyCover policy as long as: a) you only became aware of the grievance against you during the policy term and b) the claim is reported to us during the policy term.

Many other Professional Liability policies set the retroactive date to the policy inception date, meaning you would not have coverage for work that you did before the insurance policy’s inception date.


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What does Professional Liability Insurance in Canada Cover?

Most professional liability insurance policies cover judgments, settlements and defence costs. Even if the allegations against you are found to be untrue in court, you could still spend thousands of dollars on legal defence costs.

Those kinds of expenses can bankrupt a small company or contractor and have a lasting impact on your professional reputation and future business.


Who Needs Professional Liability Insurance?

Any business providing professional services needs to have professional liability insurance. Whether you’re an independent or freelance contractor, business owner or employee, at EasyCover, we offer easily accessible and affordable professional liability insurance for a variety of industries, including, but not limited to:

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How Does Professional Liability Insurance Work?

Professional liability insurance in Canada is a claims-made insurance policy. This means only claims made during the coverage periods are covered by the insurance company even if the event occurred in the past.

These policies usually feature two distinct qualities: a retroactive date and an extended reporting period.

  • A retroactive date is when the insurance policy begins, and it can be set as a date in the past.
  • The extended reporting period is a date you set in the future to which claims can still be covered after the end of your policy.

That means whenever your policy ends, the coverage can last for the time you chose to extend afterward.


What Does Professional Liability Insurance Cover?


Product failure

Your professional liability insurance policy can cover the consequence of getting sued for damages due to a faulty product.

Not only that, but the policy can also cover all legal costs associated with the lawsuit.

Whether you built a faulty product, designed an app that didn’t work, or your product caused any kind of damage, your client can sue you for a large amount of money which would be a huge financial loss for your business.

That’s why professional liability insurance is important for your business and its financial well-being.

Professional negligence

A claim of professional negligence is made when your client believes that they did not receive the promised level of service or product.

If you’re a consultant, for example, your client can decide your advice was not accurate and did not benefit them and proceed to file a claim to receive compensation.

In these cases, your professional liability insurance kicks in to cover all resulting financial loss and legal fees.

Media implications

Media implications can include many things such as copyright infringement, libel, and defamation.

Using someone else’s pictures without proper credit, for example, can lead to the original owner filing a lawsuit which will cost you not only money but your reputation as well.


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What is Not Covered by Professional Liability Insurance in Canada?


Professional liability insurance will not cover any bodily injury and property caused by your product or services. It also does not cover any intentional, criminal or fraudulent acts.

Additionally, professional liability insurance won’t cover cases where cost estimates and guarantees were given as well as incorrect profit estimates.


What is the Cost of Professional Liability Insurance in Canada?

The cost of each professional liability insurance policy will vary. Every business has its own unique risk factors that require a certain set of coverage options.

That’s why the cost of professional liability insurance depends on things like the industry, annual revenue, number of employees, history of insurance claims, the level of your business risk, and the value of your product or service.

The easiest way to determine how much professional liability insurance will cost your business, is to get a free online quote.


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How Much Professional Liability Insurance Coverage Should I Get?

EasyCover offers three options for coverage:

  • $1 million
  • $2 million
  • $5 million

The amount of professional liability insurance you should get depends on the level of risk associated with your business.

That way, you can avoid being underinsured and paying out of pocket when you’re being faced with a lawsuit, or overpaying for insurance coverage your business does not benefit from.

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Professional Liability Insurance FAQs

While professional liability insurance covers lawsuits regarding neglect or failure to deliver promised services. Commercial general liability insurance is concerned with claims where a third party is involved because they suffered a bodily injury or had their property damaged because of your business or its services.

Depending on the industry, some businesses are legally required to carry professional liability insurance, while some are not.

However, any professional offering advice, a product, or service is prone to be sued and therefore cause a significant financial burden for your business and possibly lead to you shutting down your operations.

Yes, it doesn’t matter where your business operations are located, as long as you are offering services to clients, you are exposed to errors and omissions claims which will result in legal fees and settlement costs paid out of your pocket.

Your home insurance policy will not cover your business.

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