Malpractice Insurance Provider Chicago IL

A small business owner may need to purchase specialized liability insurance to cover gaps in a comprehensive general liability policy .

An errors and omissions, or E&O, liability policy (often called malpractice insurance) covers liability for negligent acts, errors and omissions committed by professionals, including physicians, accountants, lawyers, etc.

An E&O liability policy may be mandatory. State law sometimes requires that certain professionals maintain an E&O policy with a certain minimum amount of liability coverage. The requirement may only extend to certain professionals (e.g., physicians). In some cases, the obligation applies to anyone practicing in the profession, irrespective of the business form in which they operate. In other cases, the obligation may be imposed by the state's code that empowers professionals to form professional corporations , limited liability partnerships , or possibly limited liability companies . In this case, professionals operating outside of these business forms may not be compelled to obtain liability coverage. State laws differ significantly in these respects, so make sure you check your state's particular laws.

State licensing boards and professional organizations in each state are good sources for information on liability insurance requirements imposed on particular professions.

Where E&O liability coverage is optional, the professional must weigh the risk of being self-insured against the costs of insurance. In doing so, the professional must remember that the personal commission of a tort , such as malpractice, represents a significant exception to the limited liability that otherwise applies in a limited liability company (LLC) or a corporation.

To protect against other forms of liability, the professional will have to undertake other asset protection measures described here in this small business guide, including strategically structuring and funding the business entity , exemption planning , the use of asset protection trusts , etc.

When the cost of insurance is especially significant (e.g., some physicians pay annual premiums of $50,000 or more for E&O liability insurance) and an effective asset protection plan is in place, consideration may be given to foregoing insurance, if this is an option in your particular state. Clearly, this decision should only be made after very careful deliberation.

Negligent Acts v. Errors and Omissions. An E&O policy will cover both "negligent" acts and errors and omissions that result in loss to another person. Thus, coverage should extend to all causes of action that arise from the insured's professional services and not merely a cause of action based on negligence.

Insurance companies sometimes attempt to limit coverage to a cause of action based on negligence, arguing that only negligent errors and omissions are covered. The courts generally have rejected this argument from insurance companies.

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These days, when everyone seems to be suing everyone else, insurance premiums continue to soar. Yet some insurance companies, fearing that the possibility of such lawsuits is too great, actually refuse to make certain types of insurance available to businesses. So in most cases you have insurance you can barely afford, and in some cases you can't even get insurance. What's a small business owner to do?

One solution is to explore alternatives to traditional insurance. In this discussion we'll examine a couple of insurance alternatives. As we do this, please remember that some insurance is required as a matter of law (auto liability for example) and that some types may be so important given your line of work (general liability insurance, malpractice insurance) that you don't belong in business if you can't afford it or can't get it at all.

Self insurance. With self insurance you simply set aside money — some businesses choose to set aside what they would be paying in premiums if they had purchased insurance — and use that money when an unfortunate event occurs. For a small business, the best place to think about self insuring is with property insurance rather than liability insurance because the risks are more manageable. For example, suppose you are paying for auto theft, fire, and collision (that is, the kind of insurance that replaces your car if it's in an accident, not someone else's) protection on your vehicle. If you dropped this coverage and put your savings in premiums into a bank, eventually you would save enough money to replace a vehicle from these funds.

Of course, one of the dangers with this approach is that you could have an unfortunate incident before you have enough money in your fund. You also cannot use this approach if you have financed the property in question and are required to maintain insurance by your lender.

But even if you can't totally self insure, you may be able to self insure a little by purchasing policies wi...