Licensed Professionals: Understand Your Insurance Obligations and Needs

June 14, 2024
The Law Firm of J.W. Stafford

Obtaining and keeping a professional license often comes with various responsibilities, such as continuing education and paying your licensing fees. One requirement that often gets overlooked is maintaining malpractice or other types of insurance. From your licensing board’s perspective, insurance protects clients or patients in the event that they have a claim and you do not have the resources to pay it. Failure to have insurance can, therefore, jeopardize your license. If you have questions about whether you need to carry insurance and other related obligations, a professional license defense attorney can provide you with some guidance. 

How Malpractice or Liability Insurance Protects You

Some licensing boards may require that their members be insured, while others may not. Setting aside the question of whether insurance is required, it is important to understand why having insurance may be a good idea. Insurance can protect you from having to pay costly claims out of your personal or business resources. 

For example, an accountant may make a mistake in preparing a business’ financial statements and tax returns that cost them hundreds of thousands of dollars. If the business successfully asserts a claim against the accountant, the accountant’s insurance policy would likely cover the claim. If the accountant doesn’t have insurance, they would have to pay the claim from their business or personal assets, depending on how their practice is structured. This could have devastating consequences on both their practice and their personal life. In addition, it could lead to disciplinary action if they were required to carry insurance but did not. 

In addition to covering claims, insurance may also cover any legal fees or other costs incurred in defending yourself. Even if the claim is without merit, these costs could be significant. Having insurance in place protects you from having to pay out-of-pocket to defend yourself. 

Understand Your Coverage

Some professionals will buy a minimal amount of coverage just to comply with any licensing obligations. Unfortunately, they then assume that they are covered for everything when the reality is quite different. Even if you do not anticipate claims, you should make sure that your policy provides good value if you are required to pay for it. To that end, here are some aspects of your coverage you should focus on: 

  • Policy limits: This is the maximum amount of coverage that your policy will provide. In general, the higher the policy limit, the more expensive the coverage. When purchasing coverage, compare the policy limit with what you might think the average claim you could face would be worth. A policy limit of $300,000 may not make sense if you could reasonably face claims from anywhere between $500,000 to $1 million. 
  • Per occurrence vs. aggregate coverage: Many policies will provide a “per occurrence” limit that is then capped by an “aggregate” limit. For example, you may have coverage of $300,000 for one claim, but you may be limited to $500,000 if you are facing multiple claims. Understanding how this part of your policy works should go hand-in-hand with understanding your policy limits. 
  • Exclusions: You also want to understand the major exclusions of your coverage. For example, your malpractice insurance may not cover illegal acts. As a result, a dentist who is sued by their patient for sexual assault may not have insurance coverage. 
  • Cost of defense: As mentioned above, one of the benefits of insurance is that it will pay your legal fees and other costs if you have to defend yourself. However, you need to understand whether that covers only legal fees and costs incurred in the context of a court proceeding or whether it would include administrative proceedings as well. 

While a professional license attorney can help you understand your policy, the best course of action is to form a relationship with an insurance agent you can trust. They can explain the finer points of the policies that are available and what you can expect in terms of premiums. 

Contact The Law Firm of J. W. Stafford to Discuss Your Insurance Professional Liability Insurance Obligations

Required by your licensing board or not, practicing without insurance can be very risky. To discuss your obligations, coverage limitations, and related risks, professional license defense attorney J.W. Stafford and his team can help you make an informed decision. Call us today at 410-514-6099 or send us an email to schedule a consultation.