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First of all, let's define exactly what we mean when we refer to "professional liability insurance" . . . Simply stated, it covers a person or an organization (partnership, corporation, etc.) for claims made by third parties (clients, patients, customers, etc.), alleging negligence in the rendering of, or the failure to render, professional services. What constitutes "negligence" is a bit ambiguous, but can be loosely defined as the failure to provide the degree of knowledge, care or skill of the average professional peer, in good standing, under similar circumstances. Professional
liability insurance is sometimes referred to as "errors &
omissions" or "E&O" insurance, and in the case of
medical professionals it is often referred to as "malpractice"
insurance. If you are looking for information concerning medical
professional liability for physicians, surgeons, dentists, chiropractors,
healthcare facilities, etc., please click here Essentially, anyone or any organization that holds itself out as an expert in a particular field or discipline, and receives compensation in some form for this expertise, is subject to potential claims based upon "professional liability", "errors & omissions", or "malpractice". One of the "key" issues to consider, when deciding upon professional liability insurance coverage is that of DEFENSE. Even were we to assume that you or your firm would never do something that could be considered an "error" or "omission", you simply cannot ignore the fact that anyone can allege virtually anything - and drag you into court. Maybe it has nothing to do with you directly, but another firm gets sued by a client, and they then cross-complain against anyone and everyone who was even remotely involved in the disputed work. Even if it turns out that you have done nothing wrong, you could still be faced with THOUSANDS OF DOLLARS in defense costs. Remember, good professional liability defense attorneys are not inexpensive, and not only do they expect to be paid, regardless of the outcome, they usually also require that a substantial retainer and deposit against costs be paid - prior to formally representing you. Oh, one more thing . . . I sometimes hear from clients that they believe that if they "win", they will simply demand that the losing plaintiff pay their legal bills. There are two key problems with this. First, even if a court were to make such an award, you still have to collect on the judgment; not to mention that you would already have had to pay your attorneys in the first place. Second, such awards of costs against a losing party is EXTREMELY RARE in courts in the U.S. But, by all means, speak with your attorney about this - if he or she tells you differently, be sure to get that in writing! OK, OK . . . Where do we go from here? When it comes to purchasing professional liability insurance coverage, the first critical decision must be that of selecting your insurance broker. Your insurance broker should be truly "independent" - meaning he or she is not focused solely upon selling you any one particular program. This is certainly not to suggest that "program" policies aren't good ones. In fact, they often provide good coverage at a fair price. Sometimes these programs are "endorsed" by various professional associations, such as Bar Associations, Medical Societies, or other similar groups. While, sometimes, these endorsements are truly meaningful, most often they are little more than a marketing device, for which the "endorsing" organization is paid. Some programs are designed to be easy to underwrite - meaning that if you or your firm fits within a preset "average" range, you will qualify, but if you present any deviation from the "norm", you end up either not qualifying - or paying more for your coverage than you should. This is referred to as "slot underwriting". An experienced and knowledgeable insurance broker, who specializes in professional liability coverage, will discuss with you all available options . . . and most importantly, will be able to discuss the potential advantages and disadvantages of your choices. Most professional liability policies are written on a "claims-made" basis, though sometimes coverage is available on an "occurrence" basis. Knowing which you have - or which you need - can be absolutely critical in preventing dangerous gaps in coverage. Are defense costs provided "within limits" or "outside limits" or maybe somewhere in-between? What about the deductible? Does it apply to defense costs? Does your policy provide coverage for administrative or disciplinary proceeding brought by a governmental or regulatory body? What "triggers" coverage? Does a simple allegation, such as a statement made by a client, or does an actual written demand have to be made . . . or maybe a lawsuit must be filed and served before you are protected? Do you - the insured professional - have any input in settlement negotiations? Is your consent required in order for your insurance company to settle? If so, and if you decline to settle, what happens at that point? Who selects defense counsel? Will your insurance company appoint an attorney for you, or will you - the insured professional - have any choices about who is to represent you? What about your time? If you need to take time away from your practice or your business for depositions, trial, etc., are you going to be compensated in any way for your lost income? There are no "right" or "wrong" answers to any of these questions, but it is critical that you - the insured professional - know what level of coverage your premium dollars are buying. Getting these questions answered should be part of the insurance BUYING process, since once you have a claim, it's too late to find out what coverage you DON'T have. What about claims, by the way . . . does the fact that you've had a professional liability claim (or claims) in the past disqualify you from getting good coverage? Absolutely not! While, obviously, each applicant's situation must be reviewed individually, prior claims experience is not necessarily a big problem. Frankly, even if your past claims experience puts you into a "hard-to-place" category, an experienced, creative insurance professional should be able to find good, affordable coverage. For additional
information, please click on one of the selections to the left. I'm
continually adding new categories, so if you don't see your profession
listed, it's only because I haven't had time to prepare a page yet.
Of course, if you'd prefer, you can also click here I look forward to speaking with you soon! Bruce R. Swicker
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Copyright 2002, Bruce R. Swicker, "The professional's insurance professional!" All rights reserved. |
