Assurex E&O Plus | Avoid Errors and Omissions When Placing Professional Liability
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Avoid Errors and Omissions When Placing Professional Liability

28 Jul Avoid Errors and Omissions When Placing Professional Liability

Posted at 15:00h in Pearsall’s Perspective – E&O Plus Tip of the Week by

When placing coverage for your clients, it is likely that professional liability could be one of the exposures needing attention. When most agency sales staff think of professional liability (also known as errors and omissions), the following classes of professional business come to mind:

  • Travel agents
  • Real estate agents
  • Lawyers
  • Medical professionals
  • Accountants

 

While these the more common, there are over 100 additional professional occupations that have a professional liability exposure.

Key Issues to Consider:

  • How do you know if the account has a professional liability exposure? You can ask the prospect, but they may not be aware of this exposure. They may believe their general liability (GL) policy will afford the necessary coverage. A great way to determine if a professional liability exposure exists is by using an industry exposure analysis checklist. It is also good to check the GL coverage to see if it contains a professional liability exclusion. This provides some indication of a professional liability exposure.

 

  • The application. As with any application, accuracy is extremely critical. It is strongly encouraged to have your client complete the application. Or, when meeting with the client, ask questions and document their answers accordingly. The client should be asked to review the application, and if the responses to the questions look correct, the client should then sign the application.

 

  • When marketing the coverage, be sure to allow sufficient time, at least 30-45 days before you plan to propose the coverage.

 

  • Reviewing the proposal is a significant part of the process. Professional liability coverage is normally written on a claims-made form. A key aspect of a claims-made policy is that virtually no two policies are the same – and the differences can be very important. Be sure to secure and review a complete specimen policy from the market. It is suggested to provide this specimen policy to the prospect for review and discussion.

 

Issues to Review Include:

  • What activities are covered / excluded? A main area for potential significant differences involves the description of covered professional services. This area must be reviewed by the agency and the client when coverage is initially being placed or when it is being moved to a new carrier at renewal time. Is everything that your client does included? Just because the activity was mentioned on the application does not mean coverage for that exposure is being provided. In addition, exclusions should be reviewed by the agency and the client to determine the degree of concern for those exclusions.

 

  • Who is insured? This is a common area where professional liability policies can vary from one carrier to another.

 

  • Is there full prior acts coverage or a retroactive date? This is a major issue with professional liability coverage. For coverage to potentially apply, the date of the error or omission must be after any applicable retroactive date as noted on the policy. For the customer to have coverage for all prior wrongful acts, look to secure full prior acts coverage. If the professional liability policy contains a retroactive date, you should bring this to the client’s attention and explain the significance. If the coverage is moved to another carrier at renewal time, the new policy should have the same retroactive date as the expiring policy.

 

  • The limits and how they work. It is always best for agencies to provide options for the client to consider. In the world of professional liability, limits are provided on a per-claim and aggregate basis, so options involving both should be presented. To avoid your client exhausting his or her limits because of one claim, it is suggested to provide options where the aggregate limit is a multiple of the per-claim limit.

 

  • The deductible. Professional liability policies will typically require the policyholder to pay a deductible in the event of a claim. The deductible can involve defense costs and the judgment, or possibly only require payment of the deductible if the client is determined to be liable. It is important that your client understands their obligations at the time of a claim.

 

The professional liability line of business generates a significant amount of E&O claims activity with many in the multi-million-dollar arena. Agency staff dealing with this exposure should be well trained on the product and how it works.