Important Information for Illinois Professionals & Businesses

Professional Liability Insurance — often called Errors & Omissions (E&O) — protects against certain claims alleging that professional services, advice, errors, omissions, or failures caused a financial loss.

Is Professional Liability Mandatory in Illinois?

There is no single Illinois law requiring every business to carry Professional Liability insurance.

However, coverage may be required because of:

  • Professional licensing requirements
  • Industry regulation
  • Customer contract
  • Vendor agreement
  • Commercial lease
  • Government contract
  • Employer requirement

Requirements vary significantly by profession.

Licensed professionals should check requirements with the appropriate Illinois regulatory agency.

Read more:Illinois Department of Financial & Professional Regulation

General Liability Does Not Replace Professional Liability

These policies cover different risks.

General Liability

Generally deals with certain bodily injury, property damage, premises and completed-operations claims.

Professional Liability

Generally addresses allegations involving professional services, advice, mistakes, negligence, errors or omissions.

Example:

A customer slips on your office floor.

That may involve General Liability.

A customer alleges your professional advice caused a financial loss.

That may involve Professional Liability.

Who Should Consider Professional Liability?

Examples include:

  • Consultants
  • Accountants
  • Real estate professionals
  • Property managers
  • Technology professionals
  • Designers
  • Engineers
  • Architects
  • Medical and wellness professionals
  • Marketing professionals
  • Business advisors
  • Other professional service businesses

The correct policy depends on the actual services performed.

Claims-Made Coverage — Very Important

Many Professional Liability policies are written on a:

Claims-Made basis

This means the date the claim is made and reported can be extremely important.

Do not assume that because the work was performed years ago, an old policy will automatically respond.

Retroactive Date

A claims-made policy may contain a Retroactive Date.

Claims arising from professional services performed before that date may not be covered.

When changing insurance companies, protect the retroactive date whenever possible.

Do not simply compare premium.

Prior Acts Coverage

Prior Acts coverage may protect professional services performed before the current policy term, subject to the retroactive date and policy provisions.

This can be extremely important when moving from one insurer to another.

Tail Coverage / Extended Reporting Period

When a claims-made Professional Liability policy is canceled or nonrenewed, an Extended Reporting Period — commonly called Tail Coverage — may be available.

Tail coverage generally does not insure new work.

It extends the period during which certain claims arising from previously covered work may be reported.

Never cancel a claims-made policy without reviewing this issue.

How Is Professional Liability Premium Calculated?

Insurers may consider:

  • Type of professional services
  • Annual revenue
  • Number of professionals
  • Payroll
  • Years in business
  • Client type
  • Largest customer
  • Contract size
  • Geographic area
  • Prior claims
  • Professional qualifications
  • Risk-management procedures
  • Policy limits
  • Deductible
  • Retroactive date

Loss Runs

Professional Liability insurers frequently request several years of loss history.

Loss runs may show:

  • Claim date
  • Allegation
  • Amount paid
  • Amount reserved
  • Open claims
  • Closed claims

Claim frequency and severity can affect both premium and eligibility.

Common Problems

Changing insurers

Action: Protect your retroactive date and verify Prior Acts coverage.

Retiring or closing the business

Action: Ask whether Tail Coverage is necessary.

Adding a new professional service

Action: Notify your insurer before assuming it is covered.

Client requires E&O

Action: Send the exact contract requirements to your insurance agent.

Received a professional claim or demand letter

Action: Report it immediately. Do not wait for a lawsuit.

Need Professional Liability Insurance?

Insurhaus can help evaluate Professional Liability / E&O options for qualifying businesses.

630-786-9971info@insurhaus.comwww.insurhaus.com