Professional liability arises from the failure to use the degree of skill expected of a person in a particular field. Professional liability insurance is insurance covering liability arising out of providing professional services to others.
By law, professionals are required to perform the services for which they were hired in accordance with the terms of contract. While the first duty is primarily contractual, the second arises from the principle of tort law.
A contractual arrangement is created, when a client hires a professional to perform a service. When he fails to perform the contractual obligations as promised and the client suffers harm as a result, the injured party is entitled to be restored to the position he would have occupied had the contract been performed as promised.
A professional is expected to use reasonable care to avoid causing injury to his clients in the exercise of his duties. Failure to comply with such accepted standard of conduct exposes a professional to liability for damage to another person. A wrongful act is established by determining whether a prudent person, while exercising ordinary care, would have foreseen the injury or damage that would have naturally or probably resulted from his conduct.
Violation of duty towards a client by a professional can result in a contract action, or a tort action, or both. A breach of contract arises when the professional fails to perform the services agreed to.
The professional liability coverage needs of professionals differ according to the possible consequences of their professional acts or omissions. Consequently, professional liability policies differ in the types of loss they cover. The principal consequence of a physician’s negligence is physical or psychological injury to a patient.