What is the difference between a CGL and Professional Liability policy? A CGL is all I really need, right?
Let’s deal with the first part, first. There are a number of differences, but the main one is they provide coverage for entirely different types of liability. In fact, a CGL specifically excludes losses arising from services or advice you provide.
A CGL will cover your business against claims brought by third parties for bodily injury, death or property damage they suffer as a result of your business operations or actions/inactions of you and your employees. These could arise on your premises, on public property or on a client’s site. An example would be you attend a client’s workplace to do a presentation, and while you are on lunch, the projector you brought malfunctions and overheats scorching their expensive boardroom table.
Professional Liability provides protection from financial liability arising out of the professional duty you owe your clients related to the service or advice you provide. For example; you make a bookkeeping error, which results in a client owing back taxes to the tune of $50,000 including interest and penalties. He sues you for your negligence. The Professional Liability (E&O) policy would respond.
Is a CGL (Commercial General Liability) policy all you need? That depends in part on what exactly you do, but if you provide a service or advice, without Professional Liability, you have gaps in coverage. A CGL is important protection as described above, but it will not protect you for suits arising from allegedly bad advice, or other negligence or mistakes that cost your client.
One more point to make, and it’s perhaps the MOST important one! You don’t have to actually have made any mistake, or done anything wrong to be sued. A Professional Liability policy will protect you in these circumstances too.
Unfortunately, the mind frame “I’m good at what I do. It will never happen to me” can end up being a very costly risk to take. To illustrate, let’s say you pay on average $1,200 premium per year for 15 years. With lawyers charging upwards of $500 per hour, that gives you less than a weeks’ worth of legal expertise – not nearly enough. It’s easy to see how costly it is to have to defend yourself against even a frivolous lawsuit, which in the absence of coverage means you are out of pocket.