Why take out Professional Civil Liability insurance?

The emergence of new professions in a labor and business market in constant evolution has caused Professional Civil Liability policies to gain prominence in recent years; from policies for professional groups to others for newly created professionals. The gaps in the legislation and the difficulty of defining coverage, as well as the rapid changes generated by technological development, mark the evolution of a product such as Professional CR.

Looking to the future, the greatest strength of the Professional Civil Liability insurance market will lie in its ability to provide solutions in the face of the constant appearance of new professions thanks to digitalization. On the other hand, its weaknesses arise from the ambiguity of certain exposures, as well as the difficulties in adequately identifying and defining certain risks, in the face of these new exposures arising from digitization. Thus, to take advantage of future opportunities, Professional Civil Liability insurance needs to offer greater certainty to these new policyholders.

The concept of Professional CR

The term professional civil liability alludes to a broad concept. Depending on the industry for which the civil liability insurance policy for professional risks is designed, different scenarios are contemplated and different coverages come into play. However, we can work with a generic concept, understanding Professional RC as the damages arising in the professional field as a result of errors, omissions, or negligence committed in the performance of a service to a third party. Considering this broad concept, when we talk about Professional Civil Liability, the first thing is to narrow down the definition of coverage based on the exposure of the company covered by the insurance.

Exploitation Civil Liability

The second is to differentiate it from the Exploitation RC, a basic coverage in general civil liability insurance and compulsory contracting in certain activities. The Operating CR is intended to cover damages caused to third parties by the activity of the company. Thus, the Professional CR would be focused on covering all the technical or professional aspects that are not covered by the Exploitation CR, such as, for example, many of the new intellectual works, which are increasingly important in the so-called knowledge economy.

Professional CR is aimed at covering new elements that have appeared on the market and that insurers are excluding from Exploitation CR

Another key part is understanding the definition of the term professional in a broad sense. And it is that the world of work and business has evolved so much that it is no longer useful to look at the traditional definitions of collegiate professionals, such as architects or lawyers. 

Assess and quantify new risks

“The market is currently providing multiple insurance solutions for possible Professional Civil Liability that have emerged in response to the technological advances we are experiencing,” says Juan Elidrissi Feito, Casualty Claims Team Leader at Willis Towers Watson Iberia. In other words, for the time being, Professional Civil Liability is defined by the market and not by the legislator, as is the case with other types of civil liability.

To cover the risks of the new unregulated professions, a constant dialogue between insurers, brokers, and clients is necessary to identify and analyze risks and thus be able to determine what a professional risk civil liability insurance policy should and should not cover. Once again, in-depth knowledge of the sector in which you work and having good advice is key when determining coverage.

When analyzing the consequences of a claim resulting from an error in professional activity, it is also important to assess the degree of negligence of the professional

In short, Professional Civil Liability covers the obligation of a professional to repair the damage that has been caused in the exercise of his profession due to errors that he has made involuntarily. Given that these are usually complex claims, it is recommended that those affected, whether they are insured or injured, have expert advice.

The issue of negligence and other coverage

When analyzing the consequences of a claim resulting from an error in professional activity, it is also important to assess the degree of negligence of the professional: analyze to what extent the malpractice has influenced the final result. It is always the professional who must prove that he acted with diligence, and not the other way around, since the client does not have to possess the necessary specialized knowledge to present evidence to the contrary.

In addition to covering the professional error itself, professional risk civil liability insurance policies can also cover concepts such as penalties, liquidated damages, or liability limitations. Once again, private coverage is closely related to the sector and the company’s activity. For example, liquidated damages are common in construction policies. In addition, in each case, it is necessary to assess the impact of the legislation and whether or not it allows coverage.

“It is possible to find cases in which the consideration for the damage suffered by the injured party is the price of the contract that has been paid to date,” adds Juan Elidrissi Feito. In short, in the Professional Civil Liability market, there are still many open fronts today. In search of greater certainty in the coverage for all parties (insurers, brokers, and clients), work must be done on the development of Professional CR solutions that are adapted to the real exposure, insured activity and are well defined, to eliminate possible gray or diffuse areas caused by the new professionals in the digitized world.

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