Accountant’s Professional Liability Insurance
Liability insurance is a form of insurance policy designed for the protection of a business entity or individual from risks of being held lawfully liable, and as well from being litigated for an offense, such as negligence, injury, fraud, or malpractice. Once one is proven to be legally liable, the legal costs and other legal expenses are the costs covered by liability insurance. However, contractual charges and intentional damages are circumstances not included to be covered in liability insurance coverage.
The types of liability insurance are general liability, professional liability, product liability, Employment Practices Liability Insurance or EPLI, and D & O liability or Directors and Officers liability.
General liability insurance is intended to secure businesses from liabilities arising out of employee injuries contracted while performing job functions; and likewise covers companies from damages caused by workers. Product liability insurance encompasses protection from probable defective products distributed to consumers. EPLI, on the other hand, safeguards employers from legal rights violation cases filed by employees against them; while D & O liability insurance shields company directors and officers from claims pertaining to company performances filed against them.
In contrast, professional liability insurance is designed to safeguard professional individuals, specifically accountants and those in practice with the medical field such as doctors, nurses, surgeons, and medical technologists, from charges filed against them. The most prominent type of professional liability insurance is malpractice insurance. Other professionals who purchase professional liability insurance are teachers, engineers, and accountants.
Accountants are professionals practicing accounting and auditing procedures. Their primary roles are to measure, disclose, or provide assurance regarding financial information in order to assist in the decision making for business managers, tax and other authorities, investors, and other stakeholders in the company’s allocation of resources.
Accountants operate in the field of commerce and industry. Accountants are typically employed in accounting firms. They can also work for large companies’ department of internal accounting. In addition, they could likewise venture into private individual practice.
The Generally Accepted Accounting Principles (GAAP) is the guiding principles and ethical standards that govern accountants. International Financial Reporting Standards (IFRS) are also significant guidelines. These standards vary for each state or region. Once accountants fail in meeting these standards and regulations, clients and relevant authorities, such as the Securities and Exchange Commission (SEC), can file legal actions against them.
The liability insurance specifically created for accountant’s doing professional work is called the Accountant’s Professional Liability Insurance. This type of insurance protects them from lawsuits in line with professional accounting undertakings. It provides coverage even for higher risk activities by way of endorsement, such as SEC activities and several investment services. Intentional acts, fraud, property damages, bodily injury, and criminal acts are the charges not covered by this insurance.
For example, the accountant behind the making of a financial statement that is later discovered to be misleading and is not in compliance with GAAP can be held liable for legal charges. The moment this happens, the accountant’s professional liability insurance will cover the accompanying litigation costs.