Difference between General Liability and Professional Liability Insurance

What would happen if a client sued your business for an accident or a professional mistake? Would your insurance cover it?

Liability risks are a reality for every business, but not all coverage is the same. In high-risk industries like maritime, oil & gas, and construction, choosing the right type of liability insurance is crucial. It not just ensures protection but is also necessary to meet contractual requirements.

Many business owners assume a single policy is enough, only to realize gaps in coverage when it’s too late. Understanding the differences between liability policies ensures you’re covered from all angles—whether it’s physical damages, financial losses, or legal disputes.

In this blog, you’ll learn:

• The key differences between General and Professional Liability Insurance
• Which businesses need one, both, or additional coverage
• How liability risks vary by industry and why standard policies may not be enough
• How to ensure your business is fully protected against costly claims

What is General Liability Insurance?

‍General Liability Insurance (GLI) is often the first defense against lawsuits arising from accidents, injuries, or damage caused by business operations. It covers the following claims:

‍Bodily Injury & Medical Costs

‍It covers medical expenses, legal fees, and settlements if someone gets injured due to business operations. This ensures that your business doesn’t bear the financial burden of an accident.

‍Example: A subcontractor employed at a construction site falls due to unsafe conditions and files a lawsuit. In this case, General Liability Insurance would cover the medical expenses for the subcontractor's injuries, including hospital bills, treatment, and rehabilitation.

‍Property Damage

‍If business operations cause damage to a third party’s property, General Liability Insurance covers the cost of repairs or replacement. In this manner, it safeguards your business from large unexpected expenses.

‍Example: A maritime shipping company accidentally damages cargo at a dockyard. If the cargo is damaged during the loading or unloading process, General Liability Insurance will step in. It would cover the costs of replacing the cargo or compensating the third party for their loss.

‍Personal & Advertising Injury

‍This type of coverage protects against claims of defamation, false advertising, and copyright infringement. It ensures that your business is protected from damage to its reputation and the legal costs of defending such allegations.

‍Example: A business is sued for using a competitor’s slogan in its marketing campaign. General Liability Insurance will take care of employing a legal defense, and pay for attorney fees and court expenses. 

‍Legal Defense Costs

‍Even if a lawsuit is frivolous, General Liability Insurance ensures that your business is covered for the cost of legal defense, including attorney fees, court expenses, and settlements.

‍Example: A contractor is falsely accused of damaging underground utilities during a construction project. The contractor’s General Liability Insurance would cover the legal fees for the defense team and any costs associated with fighting the lawsuit in court.

Now, let’s take a closer look at how Professional Liability Insurance can shield your business from service-related claims.

‍What is Professional Liability Insurance?

‍Professional Liability Insurance (PLI) protects businesses from financial losses due to professional mistakes, negligence, or service-related disputes. 

The Illinois Department of Insurance states that the average indemnity payment for closed medical professional liability claims in 2023 was $400,000. This statistic underscores the significant financial exposure businesses can face when a claim is filed due to errors in the services they offer.

This type of insurance is essential for businesses that provide advice, consulting, or specialized services where errors can lead to costly legal claims. It protects you from the following claims:

‍Negligence & Errors in Professional Services

‍Professional Liability Insurance covers claims alleging that errors, miscalculations, or oversights caused financial harm to a client. This insurance protects your business from the significant costs of defending and settling such claims.

‍Example: A marine engineer miscalculates vessel load capacity, leading to cargo damage and financial losses. In this case, Professional Liability Insurance pays for the legal defense costs of hiring an attorney and other court expenses for the engineer.

‍Failure to Meet Contractual Obligations

‍This insurance also protects your business if you fail to deliver services as promised or miss critical deadlines. It ensures that you are not financially crippled by contract-related disputes.

‍Example: A construction firm’s delayed project results in penalties for a client, leading to a lawsuit. In this scenario, Professional Liability Insurance would cover the legal costs of defending the business against claims of failure to meet contractual obligations.

Misrepresentation & Inaccurate Advice

‍Professional Liability Insurance is necessary to save your business from claims related to incorrect recommendations or misleading information given to clients. It ensures that your business is not financially burdened by advice that leads to legal action.

‍Example: An oil & gas consultant advises a company on drilling techniques, but an oversight leads to an environmental violation. Professional Liability Insurance pays for the legal costs of defending the consultant against the claim of misrepresentation or inaccurate advice.

‍Legal Costs & Settlements

‍Even if a business isn’t at fault, Professional Liability Insurance kicks in to pay for the costs of hiring a legal defense, settlements, and damages. In such scenarios, it offers protection from the financial strain of defending against a lawsuit.

‍Example: A maritime compliance firm is sued for allegedly providing incomplete regulatory guidance, even though they followed best practices. Professional Liability Insurance takes care of the legal defense costs incurred during the lawsuit, even if the firm did nothing wrong. 

If your business offers both physical services and professional expertise, having both general and professional liability insurance is often necessary to mitigate risk fully.

At TWFG Khan Insurance, we understand the complexities of liability insurance in high-risk industries. Our expert brokers are ready to guide you in choosing the best coverage for your business. We help you experience the peace of mind that comes with the right insurance coverage!

Now that we've explored what Professional Liability Insurance covers, it’s important to understand the key differences between General and Professional Liability Insurance. It will help you to determine which coverage (or combination of coverages) your business needs.

‍Key Differences Between General and Professional Liability Insurance

‍While both General Liability Insurance and Professional Liability Insurance protect businesses from lawsuits, they cover different types of risks. Here’s a technical breakdown of how they differ:

When Should You Carry Both Policies?

• Example 1: A marine engineer designs a vessel modification.
  
  • If the vessel suffers physical damage due to a construction defect, General Liability applies.
  • If a miscalculation in design causes financial losses, Professional Liability applies.

• Example 2: An oil & gas consultant advises on drilling safety.
  
  • If an equipment malfunction injures workers, General Liability applies.
  • If inaccurate guidance leads to regulatory fines, Professional Liability applies.
• Example 3: A construction firm builds a bridge.
  
  • If the bridge collapses and causes injuries, General Liability applies.
  • If the collapse was due to a flawed design, Professional Liability applies.

Managing liability claims can be complex. Don’t risk your business by missing key coverage. At TWFG Khan Insurance, we provide comprehensive support for claims handling and policy selection.

In the next section, we’ll explore why liability insurance is especially crucial for businesses in high-risk sectors like maritime, oil & gas, and construction.

‍The Role of Liability Insurance in High-Risk Industries

‍Businesses in maritime, oil & gas, and construction operate in environments where accidents, legal disputes, and financial claims are more common and costly. Here’s why specialized liability insurance is essential in these industries:

‍Maritime Industry

• Workplace accidents: Dockyard injuries, slip-and-fall incidents, and cargo handling risks.
• Environmental liability: Oil spills, chemical leaks, and water contamination claims.
• Legal compliance: Jones Act and USL&H coverage for maritime workers.

Oil & Gas Sector

• High-risk operations: Drilling, refining, and transporting hazardous materials.
• Equipment failures: Malfunctioning pipelines or oilfield machinery causing damage.
• Contractual liability: Disputes over safety standards, project delays, and compliance.

Construction Industry

• Job site injuries: Worker falls, crane accidents, and heavy machinery risks.
• Property damage: Structural collapses, excavation errors, or damage to nearby buildings.
• Defective work claims: Project delays or safety hazards due to design flaws.

Let's look at a real-world case study that highlights the consequences of relying on the wrong type of insurance and how gaps in coverage can leave businesses vulnerable.

‍Case Study: Misapplication of Professional Liability Coverage

‍A medical supplies distributor provided a thermal compression therapy unit to a patient recovering from foot surgery. The distributor's salesperson mistakenly instructed the patient to use the unit 24/7 for seven days. It led to severe injuries and the amputation of four toes.

The distributor held both General Liability and Professional Liability insurance policies. However, the General Liability policy included a products-completed operations exclusion. Also, the Professional Liability policy did not cover the salesperson's actions, as they did not qualify as a "professional" under the policy terms. As a result, the distributor was left without adequate coverage for the incident.

This case highlights the critical need for businesses to understand the distinctions between General and Professional Liability Insurance. Relying solely on one type of coverage can leave significant gaps, especially when incidents involve both physical injuries and professional errors. In this instance, the distributor’s lack of comprehensive coverage led to substantial financial and reputational damage.

For businesses in high-risk industries, it’s essential to assess specific operational risks to ensure comprehensive protection. TWFG Khan Insurance specializes in custom-tailored liability solutions for high-risk industries, ensuring your business is fully protected.

You also need to consider specialized liability endorsements and additional policies to ensure they’re fully protected. Let’s explore some of these additional liability insurance considerations that could fill any potential gaps.

‍Additional Liability Insurance Considerations

‍For businesses in high-risk industries, General and Professional Liability Insurance may not cover all exposures. Specialized liability endorsements or additional policies are often necessary to mitigate unique risks.

‍1. Industry-Specific Liability Endorsements

‍Some businesses require policy endorsements—add-ons that enhance coverage for specific risks. For example:

• Maritime Industry
  
  • Maritime Employers Liability (MEL): Covers injuries to maritime workers not protected under Workers’ Compensation.
  • Protection & Indemnity (P&I) Insurance: Covers vessel liability, including crew injuries, cargo damage, and environmental liability.

• Oil & Gas Sector
  
  • Sudden & Accidental Pollution Coverage: Protects against immediate environmental damage caused by oil spills or chemical leaks.
  • Control of Well Insurance: Covers costs associated with regaining control of a well after a blowout.

2. Umbrella & Excess Liability Insurance

‍Even with General and Professional Liability coverage, some businesses require higher policy limits due to the scale of potential risks.

• Umbrella Insurance extends coverage limits for multiple policies, including General Liability, Auto Liability, and Employers’ Liability.
• Excess Liability Insurance increases limits for one specific policy, such as Professional Liability for firms with high-value contracts.

3. Cyber Liability for Digitally Connected Industries

‍Industries relying on data, automation, and connected systems face new risks that traditional liability insurance doesn’t cover. Cyber Liability Insurance protects against:

• Data breaches and ransomware attacks affecting operations.
• Third-party liability for compromised client information.
• Regulatory fines and legal costs due to compliance violations.

Example: A maritime logistics firm experiences a cyberattack that disrupts cargo tracking systems, leading to financial losses. Without Cyber Liability Insurance, legal and operational recovery costs could be significant.

Understanding the differences between these two types of coverage is crucial, but selecting and managing the right policy can be tricky. Let’s dive into some best practices for handling claims and selecting the right coverage for your business.

‍Claims Handling & Policy Selection Best Practices

‍To ensure your liability coverage is adequate, follow these best practices:

• Review Contract Requirements: Ensure compliance with contract-required liability minimums, especially in high-risk industries like construction and maritime. Failure to meet these can lead to project delays or disputes.
• Assess High-Risk Activities: Identify high-risk activities and request specialized endorsements to cover unique risks not included in standard policies.
• Work with an Expert Insurance Broker: Partner with an industry-experienced broker like TWFG Khan Insurance to customize your policy for your business’s specific needs.
• Include Legal Support: Ensure your policy takes care of legal defense costs, including attorney fees and court costs, in case of a lawsuit or regulatory issue.

With the right claims handling and policy selection practices in place, it’s time to ensure that you have the right insurance coverage tailored to your business needs. 

‍How TWFG Can Help You Get the Right Coverage

‍Navigating the complexities of General and Professional Liability Insurance can be challenging, especially for businesses in high-risk industries. At TWFG Khan Insurance, we specialize in creating customized insurance solutions to meet your unique needs.

By working with us, you can:

• Ensure compliance with contract requirements and liability minimums.
• Protect against industry-specific risks with tailored coverage options.
• Receive expert guidance from brokers who understand your business.
• Get comprehensive legal support in case of disputes or claims.

Don’t leave your business exposed—secure the right liability coverage today.

‍Get a quote from us!