Professional liability: Overview, definition, and example
What is professional liability?
Professional liability refers to the legal responsibility professionals have to compensate clients or third parties for damages caused by negligence, errors, or omissions in the performance of their professional duties. This liability arises when a professional fails to meet the standards of care expected in their field, resulting in financial losses or harm to their clients.
For example, an accountant who makes an error in a client’s tax filing, resulting in penalties, may be held liable under professional liability.
Why is professional liability important?
Professional liability is important because it ensures that professionals are accountable for their actions and provides clients with a means of recourse in case of negligence or malpractice. It promotes trust in professional services by holding providers to high standards of care.
For professionals, understanding and managing liability is critical to maintaining their reputation and mitigating risks. For clients, the concept ensures that they have a mechanism to seek compensation if a professional’s actions result in harm or losses.
Understanding professional liability through an example
Imagine an architect designs a building with structural flaws due to negligence. If the building incurs damage or poses safety risks, the architect may be held professionally liable for the resulting costs, such as repairs or harm to occupants.
In another example, a lawyer fails to meet a filing deadline for a client’s case, causing the client to lose their legal claim. The client can sue the lawyer for professional liability to recover the losses resulting from the error.
An example of a professional liability clause
Here’s how a professional liability clause might appear in a contract:
“The Service Provider shall perform all services under this Agreement with the degree of care, skill, and diligence customarily exercised by professionals in their field. The Service Provider shall be liable for any damages arising from negligence, errors, or omissions in the performance of their duties, subject to the limitations of liability outlined in this Agreement.”
Conclusion
Professional liability holds professionals accountable for the quality and accuracy of their work, ensuring clients are protected from negligence or malpractice. For businesses and individuals providing professional services, managing liability is essential to maintaining trust, minimizing risks, and safeguarding their reputation. Including a professional liability clause in agreements clarifies expectations, protects both parties, and promotes transparency in professional relationships.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.