Professional liability insurance provides financial protection against lawsuits related to one’s profession. It obligates an insurance company to defend and pay a judgment up to a fixed policy amount. It is commonly sold to doctors, lawyers, architects, and engineers. The insurance company must pay an attorney to defend the insured against the claim and pay a judgment issued against the insured up to the amount specified in the insurance contract. Professionals are required by law to provide services based on a certain standard, and professional liability insurance protects them against lawsuits for negligence.
Professional liability insurance is a contract that obligates an insurance company to defend an insured person and to pay a judgment entered against an insured person up to a fixed policy amount. This type of insurance provides people with financial protection against lawsuits related to their profession. Insurance companies often sell professional liability or malpractice insurance to doctors, lawyers, architects, engineers, and many other professionals. The person who buys the insurance is the insured. The insurance company can also settle a claim against the insured out of court.
The duty to defend the insured is an obligation that arises from professional liability insurance. Typically, the insured person files a claim with the insurance company, if a client or patient files a claim against the insured in their professional capacity. The insurance company will determine if the insurance covers the claim. If the claim is covered, the insurance company must pay an attorney or law firm to defend the insured against the claim. The attorneys representing the insured will take steps to file an answer to the lawsuit, represent the insured in court, advise the insured, and make recommendations as to whether the insured should allow the case for settlement.
Professional liability insurance also creates a duty to indemnify the insured. This means that the insurance company must pay a judgment issued against the insured up to an amount specified in the insurance contract. An insurance company that fails to defend or indemnify an insured person in accordance with the professional liability insurance contract will be in breach of the contract. The insured can file a lawsuit against the insurance company for violating the contract. An insurance company that refuses to pay a valid claim or defend an insurer is said to be acting in bad faith, which means that the insurance company does not have a valid basis for denying coverage.
Professionals such as doctors, lawyers, and architects are required by law to provide services based on a certain standard, usually one that the profession establishes as acceptable. For example, a lawyer must perform legal services with the diligence, skill, and knowledge that other lawyers in the community often practice. A lawyer who does not meet this professional standard can face a lawsuit for negligence. Professional liability insurance would work to protect the lawyer by covering the costs to defend a claim or pay a judgment against the lawyer for negligence.
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