When a professional or company takes out liability insurance , one of the most important aspects to consider is what type of expenses are covered by the insurer in the event of a claim or legal process.

Professional liability insurance policies not only cover compensation for damages caused to third parties, but also guarantee coverage of certain expenses that may arise from an incident, such as defense costs, court fees and bail.

In this article, we will analyze in detail what expenses the insurer assumes , how these coverages work, and what aspects should be considered when taking out a policy.

1. What expenses are guaranteed by the insurer?

Professional liability insurance policies typically include coverage for the following expenses:

1. Legal defense expenses.
2. Payment of judicial and extrajudicial costs.
3. Constitution of judicial bail.

These coverages allow the insured to avoid having to directly assume the costs arising from a legal claim, avoiding a significant financial impact.

Below we explain each of these guarantees in detail.

2. Legal defense expenses

One of the main expenses guaranteed by the insurer is legal defense , which covers the fees of lawyers and solicitors who represent the insured in a legal process related to their professional activity.

What does legal defense coverage include?

• Legal advice and representation in court.
• Payment of fees of lawyers and attorneys appointed by the insurer.
• Coverage of experts or witnesses that are necessary in the process.
• Defense against third-party claims for professional errors.

Practical example: An architect is sued because a client believes a building's design has structural flaws. The insurance company covers the legal defense costs, including hiring a lawyer specializing in construction law.

3. Payment of judicial and extrajudicial costs

When a lawsuit occurs, in addition to lawyers' fees, there are court and extrajudicial costs that can generate a high expense.

What are court costs?

These are the expenses derived from a legal procedure, such as:

• Court fees.
• Trial processing costs.
• Costs arising from notifications and summons.
• Procedural costs if the insured is ordered to pay them.

And what about extrajudicial costs?

These are expenses related to out-of-court settlements , such as:

• Mediation and arbitration.
• Negotiations with the plaintiff to avoid trial.
• Advice on conciliation agreements.

Practical example: A doctor receives a claim for alleged negligence. Before going to court, a mediation process is initiated with the affected patient. The insurance company covers the mediator's fees and the expenses associated with the out-of-court process.

4. Constitution of judicial bail bonds

In some cases, the courts may require the insured to post a bond to guarantee potential compensation or liabilities. Professional liability insurance may include coverage for these bonds.

What does bail bonding cover?

• Payment of civil bonds to guarantee compliance with compensation.
• Criminal bail imposed in judicial proceedings.
• Financial guarantee to respond to possible sentences.

It is important to note that paying the bond does not exempt the insured from their responsibility in the process , but it does prevent them from having to tie up large amounts of money while the litigation is resolved.

Practical example: A lawyer is sued by a client due to a case management error. The court requires a bond of €50.000 while the proceedings are resolved. The insurance company covers this amount to prevent the lawyer from having to pay the money directly.

5. Limits and conditions of expense coverage

Although most professional liability insurance policies include these coverages, it is essential to review the policy limits and conditions .

Aspects to consider:

• Compensation limit: Each policy establishes a maximum coverage limit for these expenses.
• Choice of lawyers: Some insurers allow the insured to choose their own lawyer, while others appoint attorneys.
• Exclusions: There are situations that may not be covered, such as cases of fraud or deceit on the part of the insured.
• Franchise: In some cases, the insurer covers expenses only if they exceed a certain amount.

Practical example: A financial consultant receives a claim and needs to hire a lawyer. Their policy covers up to €100.000 in legal defense, but only if the case is civil and not criminal.

6. Why is it important to have insurance that covers these expenses?

Legal costs can be very high, and litigation can seriously compromise the financial stability of a professional or company. Having civil liability insurance with coverage for defense expenses, court costs and bail bonds offers multiple benefits:

• Economic protection: It prevents the insured from having to assume high legal expenses.
• Professional peace of mind: It allows you to carry out the activity with greater safety and confidence.
• Access to specialized advice: Guarantees legal representation from experts in the sector.
• Avoid business paralysis: By having financial support, the insured can continue his activity without worries.

7. Tips for choosing the best professional liability policy

To ensure that your policy offers the best protection in terms of expenses guaranteed by the insurer, follow these tips:

1. Check coverage limits: Make sure they are appropriate to your professional activity.
2. See exclusions: Some policies do not cover certain expenses if the claim is due to deceit or fraud.
3. Question about choosing lawyers: Confirm whether you can choose your own lawyer or whether one is assigned by the insurer.
4. Evaluate the conditions of the bond coverage: Check what types of deposit are included and up to what amount.
5. Request professional advice: En canariskWe help you find the best policy adapted to your sector.

The expenses covered by the insurer in a professional liability insurance policy include legal defense, payment of court and out-of-court costs, and the posting of court bonds . These coverages are essential to protect the insured's assets and ensure their financial stability in the event of a claim.

If you are looking for a policy with full coverage for these expenses, at Canarisk we offer expert advice to find the insurance that best suits your needs.

Need more information? Contact Canarisk and receive a personalized consultation without obligation.