In the professional world, responsibilities abound, and even a simple error, omission, or misunderstanding can lead to costly legal claims. Professional liability insurance, also known as errors and omissions (E&O) insurance, is designed to protect professionals and businesses against lawsuits stemming from services provided that cause financial loss to third parties. In a place like New York, where legal and commercial demands are high, this type of coverage is not just helpful—it’s necessary.
What does professional liability insurance cover?
Unlike general liability insurance, which covers bodily injury or property damage, professional liability insurance covers:
- Errors or omissions in service delivery
- Professional negligence
- Failure to deliver services as promised or breach of contract
- Legal defense costs
This insurance is especially useful for:
- Consultants
- Accountants
- Lawyers
- Engineers
- Architects
- Financial advisors
- Real estate agents
- Healthcare professionals (in addition to malpractice coverage)
To better understand how this insurance works in practice, let’s explore two documented cases in New York where professional liability coverage would be essential in mitigating losses and protecting professional assets:
Case study 1: Construction defects in a Manhattan skyscraper
In New York City, the 1 Seaport skyscraper project—intended to be the city’s first all-glass building—faced serious structural issues. During construction, the tower began tilting due to questionable foundation techniques and unstable ground. Despite engineers warning of potential uneven settling, cost-saving measures were prioritized, resulting in a noticeable tilt. The project was halted in July 2020 and left abandoned, leading to multiple civil lawsuits. This case highlights the importance for construction firms to carry professional liability insurance. (Source)
Case study 2: Financial institution fined for improper communication practices
In January 2025, the U.S. Securities and Exchange Commission (SEC) fined Santander US Capital Markets four million dollars for employees using unauthorized messaging apps like WhatsApp to conduct business. U.S. regulations require financial institutions to archive employee communications to prevent insider trading and ensure transparency. The bank’s failure to monitor these practices led to penalties, emphasizing the value of professional liability insurance. (Source)
Key benefits of professional liability insurance
- Financial protection
A lawsuit can cost thousands or even millions of dollars in damages and legal fees. This insurance covers those expenses, preventing professionals from having to pay out of pocket. - Business continuity and reputation management
Having legal and financial support during a claim helps professionals navigate the situation more confidently, preserving their reputation and avoiding business disruption. - Compliance with contractual obligations
Many contracts, especially in sectors like construction or consulting, require active professional liability insurance as a condition to do business. - Peace of mind for you and your clients
Clients will feel confident knowing your business is prepared to respond to unexpected issues, enhancing your credibility and trustworthiness.
How to choose the right coverage
- Assess your services: Each profession has different risk levels. For example, a financial advisor needs different coverage than an architect.
- Check your contracts: Review client contracts to see if specific coverage or limits are required.
- Consider the policy limits: Ensure your coverage limit is adequate to handle potential claims in your field.
In resume, professional liability insurance is a critical risk protection tool for any service-based business or independent professional. It protects your finances, your reputation, and gives you the confidence to focus on your work. At Rondon Brokerage, we’ll help you assess your risk exposure and find the policy that fits your unique needs. Contact us today for personalized guidance.
