What Is a Counseling Liability?

The term “counseling liability” refers to legal liabilities arising from the provision of counseling services. This risk is faced by many types of professionals, including marriage counselors, substance abuse therapists, and social workers. To protect against it, professionals often take out professional liability or errors and omissions insurance policies.

How Counseling Liabilities Work

Professional counselors provide specialized advice and support for individuals dealing with various challenges, such as drug addiction, marital issues, or mental health problems such as clinical depression. Just as doctors face the risk of being accused of medical malpractice, counselors can also be accused of professional negligence by clients who feel that their services were inadequate or ineffective.

To protect against this risk, professional counselors can purchase professional liability insurance. This type of insurance is similar to the commercial general liability policies taken out by most businesses. However, unlike general liability coverage, professional liability insurance specifically protects against claims arising out of professional practices such as negligence, malpractice, or misrepresentation.

Another option for professional counselors to consider is errors and omissions insurance. This type of insurance, commonly known as “E&O insurance,” protects the policyholder from claims made by clients who allege inadequate work or negligent actions. Often, E&O insurance will cover not only the amount of the climb but also any upfront legal fees and court costs.

Counseling Liability in Finance

Financial professionals and investment advisors have strict licensing requirements, and fiduciaries have a duty to act in their client's financial interests. Since even a spurious claim of financial mismanagement can lead to a multi-million dollar lawsuit, financial professionals often take professional liability policies to defray these legal costs. Some insurers offer fiduciary liability insurance policies to protect against these claims.

Example of a Counseling Liability

There are many ways in which counseling liabilities can arise. For example, a family therapist might suspect that a child is living in an abusive household. If the therapist fails to report this suspicion to the police and the child is subsequently injured by his or her parents, the government could file a lawsuit on behalf of the injured child. In that scenario, the therapist could be held responsible for failing to report the child’s dangerous home environment.

Counselors might also face claims that do not involve physical injury. For example, a marriage counselor might work with a married couple to help them resolve their problems and save their marriage. If the couple ultimately decides to get a divorce, they might sue the marriage counselor for failing to provide them with the help they needed. In that scenario, they would allege professional negligence on the part of the marriage counselor.