Professional Liability Insurance in Portugal: Quick Guide

In this article, we will be taking a look at what Professional Liability Insurance covers, what kind of small businesses need Professional Liability Insurance, and how Professional Liability Insurance differs from other types of general liability insurance.

What is Professional Liability Insurance (Seguro de Responsabilidade Civil Profissional)?

Professional Liability Insurance is a type of insurance coverage designed to protect businesses and their professionals from claims of negligence, inadequate work, or professional errors that result in financial loss for a client. It's normally tailored to specific professions and covers legal costs, settlements, or judgments that may arise from claims of mistakes, errors, or failure to perform professional duties.

In Portugal, Professional Liability Insurance is known as Seguro de Responsabilidade Civil Professional. It can also be referred to as Errors and Omissions Insurance, or simply as E-O Insurance. This type of business insurance is mandatory for high-risk sectors in which the professional services provided can have a high negative impact on the client.

Healthcare professionals are the classic example, as every medical service provider in Portugal needs to get Professional Liability Insurance to protect itself in case of a negligent act. But Professional Liability Insurance extends to many other industries, possibly encompassing lawyers, construction workers, security guards, and even real estate agents. If you're a marketer, for example, you can use a Professional Liability policy to cover the cost of claims alleging an advertising injury.

What's Included in a Professional Liability Insurance Coverage?

Professional Liability Insurance coverage typically includes the following key components:

1. Legal Defense Costs: This covers legal expenses, court rates, and other fees associated with defending against lawsuits or claims arising from professional negligence.

2. Settlements and Judgments: Covers any settlements or judgments that arise from covered claims, including damages awarded to the claimant.

3. Negligence or Errors: Protection against claims of mistakes, errors, omissions, or negligence in the services provided by the professional or their team.

4. Legal Advice: A Professional Liability Insurance policy may include access to legal advice or risk management resources to help professionals minimize the risk of future claims.

5. Claims Made vs. Occurrence Policies: Professional Liability Insurance may be structured as either claims-made or occurrence-based. Claims-made policies cover claims made during the policy period, while occurrence policies cover incidents that occur during the policy period, regardless of when the claim is filed.

Professional liability coverage can vary according to the type of policy and location of the insurance company and the stipulated coverage limits. In a nutshell, however, Professional Liability Insurance protects professionals in case of an alleged wrongful act committed by the professionals themselves.

Does my Small Business in Portugal Need Professional Liability Insurance?

Professional Liability Insurance is vital if your business offers professional advice, consultation, or any service where there could be potential harm from errors or omissions.

To know if your small business in Portugal needs Professional Liability Insurance coverage, consider whether or not your professional services can have a significant negative impact on your client. For example:

• Doctors, nurses, dentists, and other healthcare professionals face risks of malpractice claims due to errors in treatment, diagnosis, or advice.

• Lawyers, attorneys, and legal consultants may encounter claims of negligence, errors, or omissions in their legal services.

• Management consultants, financial advisers, and business consultants may be held accountable for advice or recommendations that lead to financial losses for clients.

• Professionals in the construction industry (such as architects and engineers) are susceptible to claims related to design errors, project delays, or structural issues.

• Technology professionals may face claims of errors in coding, software performance, or data breaches.

• Professionals offering financial advice, accounting services, or tax preparation can be sued for errors in financial reporting or advice that lead to financial losses.

• Writers, editors, graphic designers, and media professionals may be sued for copyright infringement, defamation, or errors in their work.

So, is Professional Liability Insurance important for your small business or not?

In light of these examples, you should get a pretty good idea of exactly why and how you may need Professional Liability Insurance coverage.

How to Find the Best Professional Liability Insurance Policy in Portugal

Finding the best professional liability insurance policy in Portugal involves several steps:

1. Understand Your Needs: Different businesses require different professional liability insurance coverages. Be aware of the risks most commonly associated with your industry sector.

2. Research Insurance Providers: Look for insurance companies in Portugal that specialize in professional liability insurance. Research their reputation, financial stability, and customer reviews to gauge their reliability. Popular Professional Liability Insurance providers in Portugal include Tranquilidade, AIG, and Howden.

3. Compare Policies: Request quotes from multiple insurers and compare what each professional liability insurance covers. Some insurers even offer customizable policies to address specific risks associated with different professions!

4. Consider Legal Requirements: Check if your profession has any legal requirements or industry standards regarding Professional Liability Insurance. Some professions may require a minimum level of coverage, so consult with an insurance broker or lawyer to be aware of any legal requirements you may miss out on.

5. Evaluate Cost vs. Coverage: Consider the cost of the policy against the coverage offered. Opt for a balance between affordability and comprehensive coverage that protects you from potential liabilities.

The "best" Professional Liability Insurance policy is subjective and depends on your profession, risk tolerance, budget, and specific needs. Take your time to research and compare options to find the policy that best aligns with your requirements and provides adequate protection for your professional liabilities in Portugal.

How Much Does Professional Liability Insurance Cost?

The cost of professional liability coverage varies depending on several factors, including the type of professional services provided by your business and your annual revenue.

• Type of business activity.

• Annual revenue (last year + estimation of this year's revenue).

• Territory (Portugal, Europe, or outside Europe).

• Capital required (some insurance companies offer funding options with their professional liability policies).

• Can your products or services result in someone's death?

• Have you been the target of claims relating to accidents or deaths? Did such claims occur in the last three years?

Professional Liability Insurance simulators are not 100% accurate, but they should provide you with a more clear idea of how much your Professional Liability Insurance cover will cost.

Types of Professional Liability Coverage

Now that you know how the broad coverages of Professional Liability Insurance work, you should get familiar with other types of professional liability coverage. These include:

• Errors and Omissions Insurance: Error or omission insurance is the name by which the general Professional Liability Insurance we have discussed so far is sometimes known (especially in the United States). Omissions coverage is equivalent to Professional Liability Insurance coverage.

• Medical Malpractice Insurance: A sub-type of Professional Liability Insurance that provides coverage to healthcare professionals in the event they are sued by patients for alleged mistakes, negligence, or inadequate care that resulted in harm or injury.

• Cyber Liability Insurance: Insurance designed to protect from potential losses and liabilities resulting from a cyberattack or a data security breach.

• Standalone Coverage: For covering a specific risk associated with your professional services, especially if it's not part of your Professional Liability Insurance's broad coverage.

Professional Liability Insurance vs. Public Liability Insurance

To illustrate these differences, let's consider a dentist's office. When a client files a claim stating that the dentist did his job poorly, then the dentist needs Professional Liability Insurance. But if a client sues the dentist because he broke his arm while in the dentist's office (because of a flight of stairs, a wet floor, and so forth), then Public Liability Insurance is in need.

In sum, Public Liability Insurance covers cases of workplace personal injury, bodily injury, property damage, and other physical risks while also granting financial protection against client lawsuits.

Professional Liability Insurance vs. Workers' Compensation Insurance

Depending on the business owner's policy, Workers' Compensation Insurance covers everything from wrongful termination processes to personal injury sustained by employees and the potential defense costs associated with it.

Professional Liability Insurance (FAQs)

Is Professional Liability Insurance mandatory for certain professions in Portugal?

While it might not be a universal mandate, specific professions (especially those in the medical or legal fields) often require it. Always check with your industry's governing body for more information.

Professional Liability Insurance protects against what?

A Professional Liability policy protects businesses against claims of negligence, errors, or omissions in the professional services they provide. It also protects in cases in which a client sues by supporting the associated defense costs and legal fees.

What kind of small business needs Professional Liability Insurance?

If your small business consists of a financial institution, provides crucial counseling to individuals and other businesses, and is potentially subject to legal expenses associated with negligence or malpractice (such as doctors and lawyers), then Professional Liability Insurance is highly recommended and possibly mandatory.

Is Professional Liability Insurance known by any other name?

For sure! In Portugal, it's called Seguro de Responsabilidade Civil Profissional. In the United States, it's generally referred to as Errors and Omissions or E-O Insurance.

Does Professional Liability Insurance protect against instances of property damage?

Generally, property damage claims fall under the umbrella of general liability insurance, but Professional Liability Insurance can cover these claims in specific cases in which they're directly related to errors and omissions made by a professional (such as when, for example, a building is damaged due to a poor design made by the architect).

What's the difference between Professional Liability and General or Public Liability Insurance?

While both cover legal defense costs and settlements, Professional Liability focuses on errors in professional services, whereas General or Public Liability covers bodily injury and property damage.

Can I adjust my Professional Liability Insurance coverage as my business grows?

Absolutely. Most insurance providers offer the flexibility to amend your coverage as your business needs evolve, and Omissions Insurance is no exception.

Does this insurance cover intentional mistakes or dishonest acts?

No, Professional Liability Insurance typically covers unintentional mistakes. Intentional wrongdoing or fraudulent acts are generally not covered.

How do deductibles work with Professional Liability Insurance?

A deductible is the amount you'll pay out of pocket before the insurance kicks in. Higher deductibles might lead to lower premiums, but it also means higher initial out-of-pocket costs in the event of a claim.

Can independent contractors purchase Professional Liability Insurance?

Yes. You don't need to run a small business to get this type of insurance. Independent contractors and self-employed individuals in high-risk sectors are recommended to buy general liability insurance or, at the very least, malpractice insurance.