Many CPA firms assume their General Liability (GL) policy provides broad protection for anything that goes wrong in their business. After all, it’s often described as “basic business insurance.”
Unfortunately, when it comes to professional mistakes, that assumption can leave firms dangerously exposed.
What General Liability Actually Covers
General Liability insurance is designed to cover bodily injury and property damage claims, such as:
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A client slipping and falling in your office
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Accidental damage to a client’s property during a visit
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Certain advertising injury claims
GL policies are built for physical accidents, not professional judgment.
That distinction matters.
The Professional Services Exclusion
Nearly all General Liability policies include an exclusion for claims arising out of professional services.
For CPA firms, this typically means claims involving:
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Errors or omissions in tax preparation
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Incorrect financial advice
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Missed deadlines
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Inaccurate reporting
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Failure to identify compliance issues
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Advice that leads to financial loss
If a claim alleges that a client suffered a financial loss due to your professional judgment or services, the GL policy will almost certainly deny coverage.
A Common (and Costly) Scenario
Imagine a client alleges that:
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A tax filing error resulted in penalties and interest
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Incorrect advice caused a financial loss
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A missed deadline led to regulatory consequences
There’s no bodily injury. No property damage.
From the insurer’s standpoint, this is not a General Liability claim — it’s a professional liability exposure.
Without the proper coverage in place, the firm is left paying defense costs and settlements out of pocket, even if the allegation is unfounded.
Why This Matters Specifically for CPA Firms
CPA firms face a unique risk profile:
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Claims often involve large financial damages
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Defense costs can be substantial
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Allegations may surface years after the work was performed
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Even strong firms can face claims from dissatisfied clients or third parties
In many cases, the cost to defend a professional liability claim is higher than the eventual settlement.
The Role of Professional Liability (Errors & Omissions) Insurance
Professional Liability insurance is specifically designed to address these risks. It generally covers:
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Alleged errors or omissions in professional services
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Defense costs (often the largest expense)
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Settlements or judgments, subject to policy terms
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Claims made during the policy period (important for retroactive dates)
For CPA firms, this coverage is not a luxury — it’s foundational.
Where Firms Run Into Trouble
We often see CPA firms run into issues when:
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They assume GL and Professional Liability overlap
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Policies haven’t been reviewed as the firm grows or adds services
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Retroactive dates don’t align with years of prior work
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Cyber and professional liability gaps exist between policies
These problems usually aren’t discovered until a claim is filed.
The Importance of a Proactive Coverage Review
Rather than simply renewing policies each year, CPA firms benefit from periodic reviews that look at:
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How professional services are defined
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Whether exclusions match the firm’s actual work
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How cyber, EPLI, and professional liability interact
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Carrier claim-handling reputation
The goal isn’t to buy more insurance — it’s to make sure the right coverage responds when needed.
Final Thought
General Liability insurance plays an important role in protecting a business, but it was never designed to cover professional mistakes. For CPA firms, understanding that distinction — and addressing it properly — can be the difference between a manageable claim and a serious financial disruption.
If you haven’t reviewed how your policies respond to professional liability claims, it may be worth taking a closer look before a problem arises.
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