Professional and civil liability: How do they differ for businesses?

The impact of a lawsuit on your company can be huge, even threatening your continued operations. That’s why you need to know about the insurance coverage that can protect you and limit your financial losses, such as commercial general liability and professional liability insurance. Although they sound almost like the same thing, each one covers a different type of claim. The kind of civil liability coverage you need mainly depends on the field you’re in. Professional liability insurance, for example, covers the risk of legal action for errors and omissions (malpractice) that occur in the delivery of the services you provide. Here’s how to tell these two types of coverage apart so you can cover your business for the risks each of them is designed for.

What is civil liability insurance for businesses? 

In doing business, every person has an obligation to act in such a way as not to harm anyone else, and for such purposes, a business is considered a person. So a business may be held responsible if it, voluntarily or involuntarily, causes damages to others. When that occurs, the person suffering bodily, material, moral, or other harm may seek compensation from the company in court for the wrong done to them.

Here are some things a company could be held liable for:

• An employee’s mistake causes bodily harm to a customer.
• A defective product injures a customer.
• A defective product causes a fire.
• A visitor is injured at a company’s place of business.
• A piece of equipment damages the space leased by the company for business purposes.

To protect your business from the financial impacts of claims and lawsuits brought by people harmed by your operations or products or on your business premises, what you need is commercial general liability insurance. Although it’s not legally required, you can see the benefit of not putting your entire operation at risk if a third party is harmed.

As long as the risk is covered, civil liability insurance will compensate the person suffering bodily, material, or other harm caused unintentionally by the company and cover the company’s defence costs.

What is professional liability insurance? 

Depending on the field your business is in, an employee of yours could make a mistake (error or omission) that makes your company liable because it’s part of your delivery of the professional services you provide. Liability resulting from error, negligence, or omission in the provision of professional services isn’t generally covered by commercial general liability insurance, so your company may either be required or find it advisable to take out professional liability insurance as well.

Professional liability insurance, sometimes known as errors and omissions or malpractice insurance, protects your business if through malpractice, error, omission, or negligence, your delivery of the insured professional service causes harm to a person. Like general liability insurance, it also covers your defence costs if you’re sued for damages covered by the policy, whether or not you’re found liable for the damages.

To discuss whether your business needs professional liability insurance, please contact your damage insurance representative. Depending on the business, professional liability insurance may either be required, as in the case of professions governed by the Professional Code, or optional, as it is for hair salons and daycare centres.

Here are some situations where your company could be sued:

• Your company’s plumber installs the wrong diameter of pipe, resulting in water damage.
• An electrician puts the wrong wiring into a building, resulting in damage to appliances and systems or a fire.
• A hairdresser leaves a client’s hair colour on too long, resulting in chemical burns.
• A client gets a fungal infection from a manicure done using improperly sterilized instruments.

Many professionals with professional orders—lawyers, doctors, accountants, architects—are required by their order to have professional liability insurance to protect them from legal claims occurring in the exercise of their professions. But businesses in fields with no order, college, or professional association—hair and beauty salons, for example—may still need professional liability insurance to protect them against legal action related to their operations.

Key differences between civil liability and professional liability insurance 

The main difference between commercial general and professional liability insurance is what each one covers. Commercial general liability insurance covers damages caused involuntarily to third parties by a business’s operations and products or on its premises, but doesn’t cover malpractice, errors, omissions, or negligence in the provision of professional services. To be protected from the consequences of mistakes and negligence, you need to add professional liability protection to your business insurance policy.

Another difference is that commercial general liability insurance isn’t mandatory, whereas professional liability insurance may be required by law. And, generally speaking, compulsory professional liability insurance will be purchased by the professional order.

Do you need commercial general liability insurance and professional liability insurance? 

That depends on a lot of things. The insurance a business needs depends on what kind of business it is, the type of professional services its employees provide, the legal obligations of those employees, and other factors. Many businesses will need to get liability insurance and professional liability insurance, to protect them from the financial consequences of getting sued for damages they might cause to others.  To find out if your business needs professional liability insurance as well as general liability insurance, we recommend talking it over with your damage insurance representative.

To get your bearings, take a look at these examples of the two types of insurance in different types of business:

General construction contractor 
Commercial general liability risk: demolition at a construction site leaves broken glass that damages a car parked nearby.

Professional liability risk: an employee’s substandard renovation work results in water damage to a customer’s home.

Hairdresser
Commercial general liability risk: a delivery person trips over a dryer cord and breaks a leg.

Professional liability risk: a person gets a chemical burn from hair colour left on too long.

Medical clinic owner 
Commercial general liability risk: a patient slips in the hall of the clinic and is injured.

Professional liability risk: a physician prescribes the wrong medication to a patient and the patient has an allergic reaction.

The importance of getting the insurance a company needs

As we’ve seen, companies face a lot of liability risks. That’s why, as an entrepreneur, it’s important to protect yourself from third-party damage claims, thus limiging the financial impacts a lawsuit might have on your business.

At Promutuel Insurance, our damage insurance representatives can help you understand whether to get civil liability or professional liability insurance—or both—for your business. Do like thousands of Quebec entrepreneurs and ask us to recommend the right coverage for your needs and your field.

Ask for a business insurance quote online or talk to one of our damage insurance representatives today.