A variety of 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 to your firm’s reputation.
“Almost any firm that charges a fee for its services has a professional liability exposure,” says Paul D. Maxwell, a senior account executive at Aon Risk Services Central, Inc.
Smart Business spoke with Maxwell about how to protect your company from these exposures and the lawsuits that follow.
What types of firms need professional liability coverage?
Many people are familiar with the medical professional liability exposures associated with doctors, nurses, hospitals and other health care providers. However, other professions, such as accountants, architects, engineers, attorneys, insurance agents and brokers, real estate agents and brokers, and stockbrokers, may also face significant professional liability claims. In addition, property management companies, financial institutions, insurance companies and project managers may face claims or lawsuits arising out of the work they perform on behalf of clients.
Is the coverage that a doctor or hospital purchases similar to the coverage of a financial institution?
There are some similarities, yet there are also significant differences. For example, the professional liability policy for a doctor or hospital usually covers a ‘medical incident’ — any act or omission arising out of the providing of, or a failure to provide, professional medical, dental or other health care services.
The professional liability policy for a financial institution, however, usually covers a ‘wrongful act,’ typically defined as any actual or alleged negligent act, error, omission, misleading statement, or breach of duty committed by the insured. Professional liability policies protect the insured against claims that allege that they and/or their employees committed errors or omissions.
Is coverage standard from carrier to carrier?
No. The policy forms may differ greatly. 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. If the insured does not comply with the provisions of the policy, coverage may be jeopardized at the time of a claim.
