The Reality of a Professional Liability Claim

Business liability insurance is crucial for the highly fluctuating economy of 2018. Falling under a financial burden may lead to stressed and unhappy employees or upset clients. They then look to your insurance limits as their own protection resource. Low economic times may force layoffs and stretch employees too thin, causing an increase in errors and omissions.  Be sure your insurance coverage is up to par to prevent financial threats, and make sure you understand just how devastating a claim could be for your business.

The Policy

It’s important to understand professional liability insurance as well as your company and industry’s key risk factors. Secure insurance protection and keep professional liability up to date. Professional liability is a “claims-made-and-reported” policy, working only when a claim is made and reported to the insurer, regardless of when the alleged error or omission occurred.

The coverage may not be the policy you had in place when the error or omission occurred. Due to the “claims-made” trigger of professional liability coverage, it is critical to avoid lapsing in coverage. Obtain continuous professional liability coverage to ensure prior work is covered.


Regardless of how significant a problem seems, consider it a warning. Claims need to be reported to your insurer immediately. A claim is defined as a “demand for money or services.” Any possible rise to a claim also should be reported.

Some business owners fear that reporting an incident automatically increases their premium. However, insurers won’t consider an incident as a claim until a demand for money is made. Insurers understand that it is in their best interest to encourage early reporting. Their claims department may start offering advice to help you avoid incidences escalating into a claim.


Implement a claims-reporting procedure for employees. Educate your employees on the early warning signs of a potential claim. If the case involves a dissatisfied client, top management should take care of all documentation.

Warning signs include:

  • Cancelled client meetings
  • Late payments
  • Angry phone calls
  • Negative correspondence

Angry project representatives may even accuse team members of an error or omission. How staff responds to complaints is critical. Employees must listen closely and empathetically to fully document without placing fault. They should not discuss the incident with anyone other than those involved. Management should then investigate the matter.


A claims supervisor may advise taking no specific actions other than open communication and reporting further signs of trouble. There’s a possibility that legal counsel will assist with the investigation. Each situation is unique but all need strong defense prepared. The claims supervisor might contact the claimer to gather information or seek a resolution.

You will be actively involved in decision making and dispute resolution efforts. Your knowledge will be the key to determine how to best resolve the issue. One of the strongest protective measures is New Mexico business liability insurance. Further steps include staff loss prevention education, limitation of liability agreements, and open communication.

About Daniels Insurance, Inc.

At Daniels Insurance, Inc., we have a unique understanding of the risks that businesses like yours face on a regular basis. With the backing of our comprehensive coverages and our dedication to customer service and quick claims resolution, your business will be fully protected. For more information, contact us today at (855) 565-7616.