Professional Liability Insurance

It depends on how the form defines who is insured. Many professional forms extend to work performed on your behalf, so a claim arising from a subcontractor’s error can reach your policy because the client’s contract is with you. That is not the same as covering the subcontractor. They have no rights under your policy and their own carrier may pursue you, or you them. The practical answer is to require subcontractors to carry their own E&O at a stated limit and to collect the certificate before work starts.

No, and this is worth being precise about. A claims-made policy responds to claims first made and reported while it is in force. Once it ends, a new claim has nothing to attach to, even for work performed during the term. Continuous coverage helps in a different way: the incoming policy keeps the retroactive date, so past work stays within reach of the new policy. What covers reporting after the last policy ends is tail coverage. Continuity and tail solve different halves of the same problem.

Cancelling it can leave every year you worked unprotected. A claims-made policy responds to claims reported while it is in force, so once it ends there is nothing to report into, even for work done years earlier. Tail coverage, also called an extended reporting period, keeps that window open after the business stops. It is usually priced as a multiple of the expiring premium, and some forms grant it at reduced cost or free on retirement after a stated number of years with the carrier. Ask while the policy is still live.

Not as a liability claim, and only through a separate sublimit if at all. A regulatory or licensing board inquiry is not a third party suing you for financial loss, so it sits outside the insuring agreement. Some professional forms add disciplinary proceedings coverage as a small defense-only sublimit, often a fixed sum per proceeding rather than a share of the policy limit. Fines and penalties are not insurable in California in any event. Check whether your form offers the sublimit and what it is, because the amounts vary widely.

It decides who controls whether your claim settles. Many E&O forms require your agreement before the insurer can settle, which matters when the allegation touches your professional reputation. The trade-off is often a hammer clause. Refuse a settlement the insurer recommends and the matter later resolves for more, and the insurer’s obligation can be capped at the amount it could have settled for. The difference stays with you. Some forms soften this to a shared percentage. It is worth reading before you need it rather than during a dispute.