General Liability vs. Professional Liability Insurance
It is not uncommon to get questions regarding the difference between general liability insurance and professional liability insurance. We will explore the two policies, what they cover, and which policy—if not both—you may need.
What Is General Liability Insurance?
Commercial General Liability insurance—also known as public liability insurance—is designed to protect you from third-party bodily injury and property damage claims you become legally obligated to pay.
General liability claims are usually triggered by third-party bodily injury or property damage claims. It’s the most common type of liability insurance purchased by business owners across the nation.
What Does General Liability Cover?
General liability insurance covers damages to others arising from the daily operations of a business:
- Bodily Injury: Injuries, sickness, or death caused by your business operations or products. Common bodily injury claims are slip-and-falls or illness from food
- Property Damage: Physical injury to tangible property, including the loss of use of that property. For example, your employee damages a floor while moving items requiring the floor to be refinished. A vase is knocked over, causing it to break and need to be replaced. These types of claims would fall under the property damage section of your policy
- Product Liability: Provides coverage for bodily injury and property damages caused by your products. An allergic reaction from your face cream. A kombucha bottle explodes, and glass gets in the claimant's eye. A power surge protector catches on fire, causing damage to a building. These are some examples of product liability claims
- Completed Operations: Claims arising from work that has been completed or work that has been put to its intended use. A contractor installs a gas fireplace, but it leaks. The gas fumes cause sickness and require medical attention. A railing collapses, and a person falls and requires medical attention. These would be an example of completed operations claims
- Personal Injury: Claims arising from libel, slander, wrongful eviction, and violating a person’s privacy.
Although general liability policies provide an array of coverages, every policy has limitations and exclusions. Common exclusions include:
- Professional Liability
- Product Recall
- Work-Related Injuries, Illnesses, & Damages (Workers Comp)
- Liquor Liability
- Auto, Watercraft, and Trailers
- Pollution
- Employment Practices
- Intentional Acts
Common General Liability Claims
The most common general liability claims are slip-and-fall incidents and accidental property damage. Here are some examples of what a covered general liability claim may look like:
- Someone is visiting your salon and they slip on water near the sink. They dislocate their knees and need physical therapy, causing them to miss work. Your insurance could help cover their medical bills and lost wages because their injury was caused by water on the floor of your business place.
- A group of investors are visiting your manufacturing plant and a piece of equipment malfunctions, spraying paint onto their clothes and briefcases. Your insurance could help pay for dry cleaning services and new briefcases.
- You’re a fitness instructor hosting a class at a local community center. One of the students drops a weight on the floor causing damage. Your insurance may help you pay for the cost to repair the damaged flooring.
Who Needs General Liability Insurance?
Virtually every business has operations exposing them to claims and lawsuits that could cost thousands of dollars to defend—not including the costs of judgments. Although it may not be required by law, it is highly recommended that every business that provides services or products to the public purchase a general liability insurance policy.
What Is Professional Liability Insurance?
Professional liability insurance protects against financial loss and claims arising from negligence, misrepresentations, mistakes, or malpractice due to your professional services. These types of claims are usually excluded by a general liability policy.
Professional liability insurance is also referred to as:
- Professional Indemnity Insurance
- Errors & Omissions Insurance
- E&O Insurance
What Does Professional Liability Cover?
Professional liability covers individuals and companies from economic loss resulting from your errors, negligence, inaccurate advice, misleading statements, and breach of duty.
Professionals are expected to have extensive knowledge and training in their respective trades and field. When they cause financial harm due to their lack of execution in their field, they are exposed to claims and lawsuits that can cost thousands to mitigate.
Some examples of common professional liability claims include:
- An interior decorator failed to inform the designer the furniture needs to be wall-mounted rather than floor-mounted. As a result, everything will need to be redesigned, running a bill of over $7,500.
- A notary is being sued for negligence because a property was transferred when it should not have been. The investigation revealed the notary’s signature and stamp were forged. The notary was not found negligent, and the case was dismissed, but the defense costs came to $9,000.
- A photographer is contracted to photograph an event. The memory card being used failed, causing them to lose all the photographs. A claim is made against the photographer to reimburse the cost of the services.
Who Needs Professional Liability Insurance?
Anyone who provides advice or services for a fee should explore professional liability coverage.
Common professions requiring professional liability insurance include:
- Consultants
- Attorneys
- Real Estate Agents
- Graphic Designers
- Technology Professionals
- Teachers & Tutors
- Public Speakers
- Accountants
- Architects & Engineers
- Interior Designers
- Healthcare Professionals
- Coaches & Trainers
- Publishers
- And more!
How Are General & Professional Liability Insurance Similar?
General and professional liability insurance do have some similarities. For instance, most people find they need one or both of these coverages in order to be employed or do business.
Both professional and general liability insurance allow you to defend yourself against third party claims. This means your business operations or services caused injuries or damages to someone else who was not you or an employee.
Professional liability vs general liability starts to differ when you look at what each policy specifically covers.
What Are The Differences Between General Liability and Professional Liability Insurance?
General vs professional liability has one large difference: general liability focuses on the risks your operations carry and professional liability focuses on the risks your services carry.
General liability insurance covers claims arising from more physical risks such as bodily injury, property damage, product liability, advertising injury, and medical payments to a third party.
Professional liability covers risks that cause financial harm to a third party due to the professional services, or lack thereof, arising from bad advice, missed deadlines, and inadequate or inaccurate work.
Do I Need Both General Liability And Professional Liability?
Almost every business has a need for general liability insurance; it helps protect against common risks that can cause physical harm from your daily business operations, like a slip-and-fall. Professional liability responds to claims and lawsuits arising from financial loss caused to a third party because of your professional services or products.
If you have a service-based business and charge a fee for your advice or services, you should carry a professional liability policy. Every business should carry general liability insurance at a minimum to help you manage the risks your business may cause in your dealings with the public.
Because general liability and professional liability cover two different exposures, you may need both depending on your business operations. Understanding the difference between professional vs general liability is important so that you can make informed decisions about the coverages required to protect you and your business.
Discussing your current, pending, and future operations with an insurance professional can help determine the exposures of your business and the type of insurance coverage you will need to protect it.
Insurance Canopy represents some of the largest insurance carriers in the nation. We can assist you in procuring the general and professional liability coverages you need.
We can also assist in obtaining additional coverages to protect your business—such as property insurance, worker’s compensation, cyber insurance, commercial auto, product liability, and product recall insurance.
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