One of the areas of greatest confusion is the difference between professional liability insurance, general liability, and product liability. The Professional Civil Liability Insurance provides coverage to professionals (corporate or individual) for any negligent act, error or omission allegedly occurred in the performance of their professional activities and duties. It differs from the General Civil Liability and Product Civil Liability Coverage in that the events covered are those carried out by an engineer, architect, doctor or lawyer in the provision of professional services to their clients. To better understand this coverage we will have a brief discussion below of Product Liability, Professional Liability and the application of the latter and how it works.
A. Product Liability
Product liability is the legal responsibility of a manufacturer towards a consumer of its product. Liability arises from the negligent manufacture of a product, including faulty or faulty workmanship, materials, or components. It is a liability that arises from a manufacturer’s failure to properly manufacture, test, or warn on its product and occurs when the product negligently deviates from its intended function.
Product perils include bodily injury or property damage arising from the products of the named insured, but only if the bodily injury or property damage occurs off premises owned or leased by the named insured and after physical possession of the products has been transferred to others and is in the flow of commerce.
Completed operations include bodily injury and property damage arising out of the operations of the facilities or reliance on a representation or warranty made at any time with respect thereto, but only if bodily injury or property damage occurs after such operations have been completed or abandoned and occur off property owned or leased to the Named Insured.
Negligence attributable to Professional Liability is excluded from the General Civil Liability and Product Liability Coverage, which includes services or consultations rendered negligently by architects, engineers or other professionals.
B. Professional compensation
The Professional Liability Policy is designed to respond to the professional services exclusion in the CGL/Product Liability Policy. The Professional Liability Policy covers the negligent services of a professional to his client and covers an act of negligence, error or omission by an insured in the execution of his professional activities. These professional activities usually include the design, writing of specifications, feasibility studies, calculations, maps and the supervision of the same by the insured professional.
The Professional Indemnity Insurance, or Errors and Omissions, protects the insured, their employees and directors against the liability derived from their professional negligence. It covers the Legal Responsibility to indemnify a third party who has suffered an injury, loss or damage generated by the existence of a duty of care towards third parties as a result of a negligent act, error or omission in the provision of professional services by the insurance company. .
Faced with today’s increasingly litigious society, Civil Liability Insurance provides important protection to the insured professional.
Coverage applies under the Professional Liability Policy as soon as product design begins and provides protection for any act of professional negligence, error or omission that could give rise to a third party claim.
C. Applicability of Professional Indemnity Coverage
When analyzing the applicability of professional indemnity coverage, certain basic concepts must be kept in mind.
First, professional indemnity is third party coverage that is liability coverage, not property coverage, that is provided to the insured for claims against the insured by third party claimants.
Secondly, although the coverage is linked from the beginning of the design phase of the project, it cannot be claimed until after the delivery of the product and when the product has left the insured’s facilities.
Liability coverage that occurs in the insured’s workplace must be found in other policies, such as General Civil Liability, Builder’s or Contractor’s All Risk, or Protection and Indemnity policies.
Third, of course, the claim must arise from a failure in the professional services rendered. There is limited coverage provided under professional liability for defective workmanship, materials, and/or components. In addition, product liability coverage would include any claim for defective materials or components, manufacturing defects, or workmanship.
Fourth, any inadvertent and unintentional violation of a patent or copyright infringement is also covered by this policy.