Professional Liability Insurance for Management Consultants

Management consultants bring vital expertise and essential services to their clients. Companies of all types rely on a consultant's business acumen to help them improve operations or make critical management decisions.

Sometimes, however, this client-consultant relationship turns sour. Clients are disappointed in the perceived value of the services they receive. They can be dissatisfied with the outcome after implementing a recommended business procedure or strategy. If they feel they have been injured due to a consultant's mistakes, you can almost count on a complaint or formal claim for failure to provide services up to the prevailing standard of care.

Fortunately, consultants of all types and sizes can protect themselves against error and omission claims with Professional Liability (PL) Insurance.

How It Works
Professional Liability Insurance – a.k.a. Malpractice or Errors and Omissions (E&O) Insurance –provides protection in the event a client or third party makes a claim against a consultant alleging failure to perform services to the prevailing standard of care. The PL Insurance policy typically covers, up to the policy limit, both the cost to defend the consultant and any damages awarded to the claimant.

Insurance premiums are typically paid on an annual basis and provide coverage for a one-year term. The policies are written on a claims made and reported basis. That is, typically, the claim must be made by the claimant and reported to the insurer within the policy year (plus any extended reporting period) in order for coverage to come into effect.

Generally, policies will cover a consultant's work back to the earliest date of continuous PL insurance coverage. For example, if a consultant has maintained continuous PL insurance since 2002, then the current policy will cover any new claims brought against any work performed since the policy inception date in 2002. If a PL policy is cancelled or not renewed and continuous insurance ceases, then the consultant can lose coverage for all previous work unless prior acts coverage is secured on a new policy.

Typically, PL policies are written in increments of $1 million of aggregate limits, with deductibles available on a per-claim basis, starting at $1,000. Policies may exclude coverage for specific acts and services. Specialist insurance agents can help ensure you are purchasing adequate protection from a reputable carrier.

Who Needs PL Insurance?
Virtually every company or individual providing consulting services to its clients can benefit from the coverage provided by Professional Liability Insurance. In fact, some clients demand that their consultants maintain a minimum amount of coverage.

No management consultant is perfect. Errors and omissions – perceived or actual – will occur. Professional Liability Insurance provides for the representation you need to defend yourself against claims of alleged errors and omissions as well as the financial resources needed to pay any settlement or judgment against you.