In Depth
When someone is paid for their expertise and that expertise turns out to be wrong, who pays for the damage? That is what professional liability answers, and it does so through a duty of care. A professional is held to the standard of a reasonably competent peer in the same field, and when they fall short and a client relies on the flawed work, the policy responds to the resulting claim and pays to defend it.
It differs from general liability, which covers bodily injury and property damage, and from a product warranty, which promises that a thing will work. Professional liability is about the service and the advice, the parts of professional work that turn on judgment rather than a manufactured object. Coverage is almost always written claims-made, so the policy that responds is the one in force when the claim is filed. That is why professionals keep the coverage continuous and often buy tail coverage when they retire or switch carriers.
What It Looks Like
An accountant preparing a client's returns misreads a change in the tax rules and claims a deduction the client was not entitled to. Two years later the authorities disallow it, and the client owes back taxes, interest, and penalties. The client sues the accountant for the added cost. The professional liability policy responds to the claim and funds the accountant's defense, up to its limits.
Why It Matters For AI Vendors
Any business that sells expertise, advice, design, or a professional service carries this exposure, whether or not it thinks of itself as a traditional profession. A single piece of flawed work that a client relies on can produce a claim far larger than the fee earned for it. Professional liability is also a routine contractual requirement, since clients often want proof of coverage before they will engage a firm.