Does professional liability insurance cover breach of contract?

Complete Guide to Breach of Contract Coverage in Professional Liability Insurance

Why This Question Matters for Colorado and Utah Residents

Businesses in Colorado and Utah increasingly rely on professional liability insurance to protect against claims involving errors, omissions, or negligence in the services they provide. However, understanding what is and isnt covered, particularly when it comes to breach of contract, is essential due to the complex legal and commercial landscape in both states.

• Commercial Risks Diverge: In Colorado and Utah, professional liability policies often exclude breach of contract claims unless directly linked to negligence or errors in professional services. This distinction affects how businesses must approach risk management.
• Regional Business Impact: Colorado's rapidly growing commercial sectors, including technology and construction in regions like Fort Collins and Denver, and Utah's expanding professional services market around Salt Lake City, face heightened exposure to contract-related disputes.
• Legal Nuances: State-specific laws and court rulings in Colorado and Utah shape how breach of contract claims are treated in insurance policies, underscoring the need for thorough policy review and tailored coverage.

What Most People Get Wrong

Many business owners assume professional liability insurance automatically covers all contract-related disputes. In Colorado and Utah, this is rarely the case, leading to unexpected exposures and costly gaps.

Another common misunderstanding is confusing general liability policies with professional liability coverage. General liability typically covers bodily injury and property damage but does not address professional errors or contract breaches.

The Complete Picture

Professional liability insurance primarily covers claims arising from negligent acts, errors, or omissions that result in financial loss to a client. Breach of contract claims are generally excluded unless the breach stems from a covered professional error. Specific endorsements or separate contract liability policies may extend coverage.

Businesses should work closely with their insurance advisors to identify potential gaps and negotiate policy terms that align with their contractual risks. Given Colorado's status as a "Hail Alley" and Utah's growing professional sectors, the stakes for comprehensive commercial coverage are high.

Regular policy reviews and adjustments are essential, especially as business operations evolve. Coverage for breach of contract varies significantly, making proactive engagement with your FoCoIns advisor vital for protecting your business assets and reputation in the region.

Making the Right Decision for Colorado and Utah Residents

Question 1: Does Your Policy Specifically Include Breach of Contract Coverage?

Check your professional liability insurance policy definitions and endorsements carefully. Many policies exclude breach of contract unless expressly added. Consider these points:

• Request clear documentation from your insurer about inclusions/exclusions.
• Consult your FoCoIns advisor to understand your unique commercial risks.

Question 2: How Does Breach of Contract Exposure Affect Your Business?

Evaluate your contractual obligations and the potential financial impact of a breach claim. For example, if you provide design services for a Denver construction project, consider how a contractual failure could affect your liability and project continuity.

Question 3: Are There Additional Coverages or Endorsements You Should Consider?

Depending on your industry and contract types, explore endorsements for contract liability or consider separate policies. Our FoCoIns experts can help tailor solutions including risk management strategies to mitigate exposure.