What is not covered by professional liability insurance?
Professional liability insurance does not cover intentional wrongdoing, fraudulent acts, bodily injury, property damage, or general liability claims. It protects against negligence in professional services but excludes these specific areas.
Your trusted Colorado and Utah insurance partner, providing expert guidance to protect your professional services with confidence.
Complete Guide to What Professional Liability Insurance Does Not Cover
Why This Question Matters for Colorado and Utah Residents
For businesses offering professional services in Colorado and Utah, understanding the limitations of professional liability insurance is critical to avoid unexpected financial loss. Many local professionals mistakenly believe this coverage protects against all risks associated with their work, but exclusions can leave significant gaps. Knowing what is not covered helps you strategically layer your insurance to fully protect your enterprise against common regional risks.
- Intentional and Fraudulent Acts: These are excluded because insurance covers accidental mistakes, not deliberate wrongdoing. Colorado and Utah law enforce strict exclusions for fraudulent acts in professional policies.
- Bodily Injury and Property Damage: These claims typically fall under general liability insurance. Businesses in areas like Denver and Salt Lake City face risks such as slip-and-fall or damage to client property that professional liability does not address.
- Cyber Liability: Unless a specific endorsement is added, professional liability does not cover damages from cyberattacks or data breaches, a rising concern for Colorado and Utah firms handling sensitive data.
What Most People Get Wrong
A common misconception is that professional liability insurance covers every possible claim related to professional services. Many Colorado and Utah business owners are surprised when a claim involving bodily injury or property damage is denied.
Another oversight is neglecting the claims-made nature of most professional liability policies, which can result in uncovered incidents if policies lapse or retroactive dates are not maintained properly.
The Complete Picture
Professional liability insurance covers claims arising from alleged errors, omissions, or negligent acts in professional services. However, it specifically excludes intentional wrongdoing, including fraud, illegal activities, bodily injury, property damage, and general liability claims such as accidents occurring on business premises.
To address these gaps, Colorado and Utah businesses should consider pairing their professional liability with general liability insurance, cyber liability coverage, and workers' compensation as needed. Understanding the specifics of your policy's exclusions and endorsements is essential to ensure comprehensive protection.
Given the increasing frequency of cyber threats in Colorado and Utah—where data breach costs average around $187,000—specialized cyber liability coverage is becoming a necessity for professional service providers.
Making the Right Decision for Colorado and Utah Residents
Question 1: Does your business face risks related to bodily injury or property damage?
Professional liability insurance excludes claims for bodily injury and property damage. If your business has a physical location, clients visiting your premises, or handles tangible goods, you need to maintain general liability insurance separately.
- Ensure your policy covers slip-and-fall accidents, property damage, and other physical incidents common in regional commercial environments.
- Consult a local expert to evaluate your premises risks relative to Colorado and Utah laws.
Question 2: Is a claims-made policy the right choice for the long-term risks your business faces?
Professional liability insurance is typically written on a claims-made basis, meaning claims must be reported during the policy period. This policy structure requires careful management of retroactive dates and continuous coverage to avoid gaps.
Consider whether legacy work might expose you to claims after policy changes. FoCoIns advisors can help design a protection plan that secures continuous claims-made coverage, especially important for evolving professional service businesses in Colorado and Utah.
Question 3: Do you have exposures to cyber threats or data breaches?
Many professional liability policies do not automatically include cyber liability coverage. Given the rise in cyberattacks on Colorado and Utah businesses, consider adding specialized cyber insurance or a combined professional and cyber policy.
Assess risk factors like electronic record handling, client data management, and regulatory compliance to determine your cyber coverage needs.
Trusted by Your Neighbors
Local knowledge, industry-leading protection
4.9/5 Stars
Google Reviews from real customers
97% Retention Rate
Fort Collins families and businesses protected
Independent
We work for you, not insurance companies
Local
Fort Collins owned & operated since 1992
Real World Examples
Copyright Infringement Claim in Fort Collins, Colorado
Background: A graphic designer based in Fort Collins was sued for copyright infringement after using copyrighted images without permission in a client project.
Coverage: Their professional liability policy offered defense for negligence claims but explicitly excluded intentional violations like copyright infringement.
Monthly Premium: $120/month ($1,440/year)
The Incident: The client filed a lawsuit demanding $80,000 in damages for unauthorized use of images.
Total Claim Cost: $80,000 (legal fees of $30,000 + settlement of $50,000)
Designer’s Cost: $80,000 out-of-pocket - the claim was denied due to policy exclusion for intentional acts.
"I didn’t realize my insurance wouldn’t cover this kind of claim. It was a tough lesson, but now I work closely with my broker to understand all exclusions."
Data Breach Incident for a Consultant in Salt Lake City, Utah
Background: A Salt Lake City-based business consultant experienced a cyberattack that compromised client data stored on their internal systems.
Coverage: The professional liability insurance did not include cyber liability coverage, leaving the consultant financially exposed for response costs and damages.
Monthly Premium: $135/month ($1,620/year)
The Incident: The breach resulted in $120,000 in client notification costs, legal fees, and lost business.
Total Claim Cost: $120,000
Consultant’s Cost: $120,000 out-of-pocket due to cyber coverage exclusion.
"I thought my professional liability policy covered everything, but cyber threats are a different risk I wasn't prepared for. Now I have a dedicated cyber policy."
Financial Advisor’s Negligence Lawsuit in Denver, Colorado
Background: A Denver-based financial advisor faced allegations of negligence related to investment advice that led to client losses.
Coverage: The professional liability insurance covered defense costs but excluded bodily injury or property damage as well as intentional acts.
Monthly Premium: $200/month ($2,400/year)
The Incident: The client sued for $150,000 in damages, including $40,000 legal fees.
Total Claim Cost: $190,000
Advisor’s Cost: $30,000 out-of-pocket - the insurance covered the rest after negotiation.
"Understanding what’s not covered helped me choose better add-ons to my policy. I’m more confident now."
Avoid These Common Mistakes
Mistake #1: Assuming professional liability insurance covers bodily injury and property damage
What People Do: Many Colorado and Utah professionals mistakenly believe their professional liability policy will cover accidents causing physical injury or property harm.
Why It Seems Logical: Since the claims arise from business operations, some assume all liability types are included.
The Real Cost: Without proper general liability coverage, claims for slip-and-fall or property damage can lead to tens or hundreds of thousands in uncovered expenses. For example, a Denver small business owner faced a $75,000 settlement with no coverage.
Smart Alternative: Work with FoCoIns advisors to maintain separate, adequate general liability insurance tailored to local risks, ensuring complete protection.
Mistake #2: Not properly managing claims-made policies leading to coverage gaps
What People Do: Business owners often forget to renew claims-made professional liability policies or fail to secure tail coverage, leaving incidents unfunded if claims arise later.
Why It Seems Logical: Policy complexity is confusing, and it’s easy to overlook retroactive dates or renewal timing.
The Real Cost: A Salt Lake City consultancy faced a $50,000 claim years after policy expiration, which was denied due to coverage gap.
Smart Alternative: FoCoIns provides expert guidance to manage claims-made policies, ensure continuous coverage, and acquire tail coverage when needed.
Mistake #3: Overlooking the need for cyber liability coverage
What People Do: Many professional service providers assume their professional liability insurance automatically protects against cyber risks.
Why It Seems Logical: They handle sensitive data and believe one policy covers all digital risks.
The Real Cost: Without dedicated cyber insurance, businesses can face average breach costs exceeding $187,000 in Colorado and Utah, which are not reimbursed under professional liability policies.
Smart Alternative: Partner with FoCoIns to evaluate your cyber exposure and secure specialized cyber liability policies that work alongside professional liability coverage.
FAQs On The Same Topic
Find answers to your most pressing insurance questions right here.