Numerous firms and many different professions are vulnerable to professional liability exposures or ‘errors and omissions’ claims. Lawsuits resulting from services rendered can be costly to both your bottom line and your firm’s reputation.
“Almost any firm that charges a fee for its services has a professional liability exposure,” says Edward X. McNamara, a senior vice president and the regional sales director of the East Central Region for Aon.
Smart Business spoke with McNamara about protecting your company from these exposures and the lawsuits that follow them.
What types of firms need professional liability coverage?
Many people are familiar with the medical professional liability exposures that are associated with doctors, hospitals, nurses and other health care providers. However, other professions/firms may face significant professional liability claims; examples include accountants, architects, engineers, attorneys, financial institutions, insurance companies and stockbrokers. Other professions/firms, such as insurance agents and brokers, real estate brokers or property managers may face claims or lawsuits arising out of the work they perform for clients.
Is the coverage that a doctor or hospital purchases similar to the coverage of a financial institution?
The coverage has some similarities, but there are differences. The professional liability policy for a doctor or hospital usually covers a ‘medical incident,’ which is any act or omission arising out of the providing or a failure to provide professional medical, dental or other health care services by the insured.
The professional liability policy for a financial institution, however, usually covers a ‘wrongful act,’ typically defined as any actual or alleged negligent act, error or omission, misleading statement, or breach of duty committed by the insured. Professional liability policies protect the insured against claims that allege they and/or their employees committed errors or omissions.
Is coverage fairly standard from carrier to carrier?
Unfortunately, the policy forms may differ greatly from carrier to carrier. Because of this, it is important to work with an insurance professional who understands the nuances of the different forms.
The key areas that your insurance broker should understand and evaluate are coverage triggers, exclusions, claim reporting requirements, representations or warranties, settlement clauses and definitions of key terms.
If the insured and the insured’s broker do not fully understand the policy, there may be issues when a claim occurs. Likewise, if the insured does not comply with all of the provisions of the policy, it may jeopardize coverage at the time of a claim.
