E&O/Professional Liab

Which type of claim under a professional liability insurance policy would NOT be subject to the retention requirement?

A "Coverage Enhancement" claim

Employee

A Person who is, was, or will be engaged and directed by the insured professional. This includes full-time, part-time, seasonal, or leased workers, and even interns and volunteers. It does NOT include independent contractors.

Currently Valued Loss Run Reports

A currently valued loss run report means the contents were updated within 90 days of when the insured's proposed policy period would begin. If the loss run report is not currently valued, most insurance companies will not accept the loss run report. Note: Loss run reports can vary greatly from one insurance company to another.

Each of the following is excluded from coverage in Professional Liability Insurance policies EXCEPT:

A mathematical calculation by an engineer

Claim Number

A uniquie identifier that attaches an insurance claim/loss to a specific claimant.

Which of the following would NOT be considered an insured in a professional liability insurance policy?

All of these would be considered insureds.

Antitrust

Allegations or claims of violation of any federal or state antitrust laws are not covered.

Bind Coverage with the Insurance Company

Binding coverage means that an insured has agreed to an insurance company's quote and is requesting that the coverage begins on the policy's effective date. This bind coverage request is referred to as a bind order. Insurance carriers require customer service representatives to submit bind orders in writing. Bind orders can usually only be submitted via email. Bind orders must include: Signed E&O Application Confirmation of premium payment Subjectivities (other forms as required by the insurance carrier- if required)

Changes

Changes Any changes to the policy must be made by an endorsement issued by the insurance company making them part of the policy. Any other attempt to change the policy would not be effective

Most employment-related claims may come from an alleged violation of this Act, which created protected classes.

Civil Rights Act of 1964: Title VII

The Claims Process

Customer service representatives have specific duties in the event of an occurrence. - Notify the insured's insurance carrier as soon as possible - Collect the who, what, why, when and how regarding the accident from the insured - Immediately send any notices of summons and/or complaints - Cooperate with the insurance carrier

Date of Loss

Date for when the loss event occurred.

Date Reported

Date for when the loss event was reported to the insurance carrier.

Loss Description

Description of the loss event/occurrence.

Which limit is likely to be found on an E&O/Professional Liability insurance policy declarations?

Each Claim Limit

Prior Notice

If an insured had notice of a wrongful act or potential claim prior to the insurance policy period (or retroactive date if earlier), any resulting claim would not be covered.

Insured vs. Insured

If one person or entity insured under the policy makes an otherwise-covered claim against another person or entity insured under the policy, the policy will not apply.

Errors & Omissions/Professional LiabilityInsurance Overview

In a sense, most commercial liability insurance protects businesses that make something or sell a service. But they don't cover a business that sells its expertise. While, for example, most businesses still need typical liability insurance for losses due to customers who are injured on the premises, they also need professional liability insurance. Professional liability insurance protects the insured company from losses due to claims of late, incomplete, or unsatisfactory exercise of that expertise. This lesson will cover two important concepts to understand as you begin your study of E&O/Professional Liability Insurance Coverage : 1. E&O/Professional Liability Insurance vs. Commercial General Liability (CGL) Insurance 2. Types of E&O/Professional Liability Insurance policies

Unearned Premium and Notification

In this situation, the policy premium will be declared fully earned. This means that no refund of unearned premium is available if the policy is terminated early. When a merger occurs, the named insured must notify the insurance company within 60 days.

Intellectual Property

Intellectual Property There is no coverage for claims involving the theft of or unauthorized use of intellectual property such as patents, trademarks, service marks, and advertising ideas and slogans.

Location of Loss

Location for where the loss event occurred.

E&O/Professional Liability Policies vs. CGL Policies

Professional Liability vs. General Liability 1. Virtually all businesses need the liability protection provided by either a Commercial General Liability (CGL) policy or, for smaller businesses, the Business Owners Policy (BOP). 2. What isn't included in either the CGL or the BOP, however, is coverage for professional mistakes. For this reason, professionals should have both a CGL (or BOP) and a Professional Liability Insurance policy. Depending on your business, you may hear the term Errors and Omissions (E&O) insurance for professional liability. Errors and Omissions insurance is another name for professional liability insurance. However, there is no difference in coverages between an E&O policy and a Professional Liability policy. Clients that routinely purchase E&O/Professional Liability insurance include: Auditors/ Accountants/ ArchitectsAttorneys/ Consultants/ EngineersFinancial Advisors/ Insurance Agents & Brokers/ Real Estate Agents & BrokersStockbrokers Doctors are not included on this list intentionally. While doctors need this type of coverage, the policy form on which medical malpractice insurance is written is very specialized and issued by insurance companies that specialize in medical insurance. The other professions on this list can be written on more common professional liability insurance forms that can be tailored to a given profession. The professional liability policy only covers professional activities while the CGL (or BOP) covers most other liability exposures WITH THE EXCEPTION OF professional liability. A client is covered for both by purchasing both policies.

Subsidiaries of Insureds

So what happens if an entity (an insured under the policy) ceases to exist as a subsidiary of the named insured? This happens when subsidiaries are terminated or sold or transferred to another entity. The policy will only cover claims from wrongful acts that occurred between the policy inception date (or retroactive date, if applicable), and the date the subsidiary no longer existed under the named insured. Changes in Exposure will affect the acceptance date for claims arising out of wrongful acts. Understanding the details of this condition and how to communicate them to an insured may be helpful in the event of a merger or acquisition.

Expense

The cost of operating the insurance business exclusive of losses or claims

Policy Limit

The highest amount of damages the insurance carrier will pay for a claim that the insured's insurance policy covers

Additional Premiums and Notice

The insurance company can also require that an additional premium be paid for the remainder of the policy period due to the potential increased risk. As before, the named insured must give 60-days notice to the insurance company under this section.

In which situation would an insured be allowed to purchase Run-Off Coverage?

The named insured merges with another company and ceases to exist after the merger.

Term (aka policy period)

The period of coverage provided by an insurance policy.

Named Insured no longer exists

The policy will continue for the remainder of the policy period, plus the extended reporting period of 60-days, plus any Run-Off coverage purchased. However, any claims from the point of the merger forward must allege wrongful acts that occurred prior to the merger. In other words, the policy will no longer cover new incident

Abuse or Molestation

The policy will not cover allegations and claims of abuse or molestation by any insured of another in the care, custody, and control of that insured. The policy will also not cover claims of negligent employment, investigation, supervision, reporting of incidents to authorities, or retention of anyone accused of actual, alleged, or threatened abuse or molestation.

Pollution

The policy will not cover any actual or threatened pollution event, including clean-up costs and governmental fines.

Claimant

The third-arty making the claim or responsible for a loss.

Incurred (aka incurred losses)

The total amount of paid and reserve losses for a claim or policy period.

Statutory Violations

There are two main reasons for the exclusions contained in this section. Some involve criminal activity, which is rarely covered by insurance. And others should be insured under other types of insurance policies. The professional liability insurance policy will not cover violations of: - The Securities Act of 1933 - The Securities Exchange Act of 1934 - The Employee Retirement Income Security Act of 1974 (ERISA) - The RAcketeer Influenced and Corrupt Organization Act (RICO) - Surbanes-Oxley Act of 2002 - The Foreign Corrupt Practices Act of 1977 (FCPA)

Fungi or Bacteria

There is no coverage for claims related to fungus or bacteria. Remember, this is a policy that covers professional errors, not bodily injury and property damage.

Fees, Costs, Charges, or Estimates

There is no coverage for claims that allege that the insured exceeded estimated fees or any disputes involving fees, costs, or charges. The policy only covers errors in the execution of professional services.

Recording and Distribution of Material in Violation of Law

There is no coverage violations of various communications laws These include: - The Telephone Consumer Protection Act (TCPA) which regulates telemarketing through voice calls, texts, and faxes - The CAN-SPAM Act of 2003 which regulates unsolicited emails - The Fair Credit Reporting Act (FCRA) deals with the accuracy, fairness, and privacy of consumer credit information including on credit reports

Duties in the Event of a Claim or Wrongful Act that May Result in a Claim

This condition is common to most insurance policies and lists duties for which the insured is responsible in the event of a claim or potential claim. The insurance company must be notified promptly of any claim or any incident the named insured becomes aware of which MAY result in a claim. This includes the how, when, who, and what of the incident. If a claim or suit is filed, the insurance company must be notified immediately. This includes sending copies of all complaints, demands, notices, and other claim-related paperwork. The insured must also authorize the insurance company to obtain records and other information pertinent to the claim, as well as cooperate in the investigation and defense. No insured may make an offer, payment, or settlement to a claimant without the approval of the insurance company. Unique to the E&O/Professional Liability Insurance policy is the condition that if a claim involved two or more "interrelated wrongful acts," the claim is considered filed on the notification of the first claim.

Governmental and Regulatory Entity

This exclusion states that the policy will not cover anything - including defense costs - in any regulatory or governmental proceeding EXCEPT those specifically named in the Coverage Enhancement Section.

Changes in Exposure

Unique to E&O/Professional Liability Insurance policies, there are three situations, called "changes in exposure" that will affect the policy.

Policy Checklist

We recommend customer service representatives to have or obtain a standard policy checklist to ensure consistency and accuracy. Should there be any discrepancies between the documents, it serves as an excellent resource for explaining the issues to others. This in turn results in quicker resolutions.

Workers' Compensation and Similar Laws

When an employee is injured within the scope of employment, the sole remedy available to the employee is workers' compensation. Therefore, E&O/Professional Liability policies would not cover an injury that is covered by workers' compensation rules.

Territory

While most policies limit the geographic location of coverage, the ISO Professional Liability Insurance policy coverage applies anywhere in the world.

E&O Coverage

A Errors and Omissions Insurance Policy is generally a compliment to a BOP or CGL policy. Without an E&O policy, a business will not have coverage for professional mistakes made by the primary insured or their employees in the regular course of doing business. The policy declarations page will include a description of the type of professional activity to be covered by the policy. Not all professional activities are covered under the policy. Only those that fall within the description are afforded coverage. Example If Samuel was a CPA but also held a real estate license, and his professional liability insurance policy declarations stated that the policy was issued to cover his activities as an accountant and CPA, there would be no coverage for any errors or omissions he might make as a real estate agent. To cover his real estate business, Samuel would either have to have both activities (CPA and real estate) described on the policy declarations or, much more likely, purchase two policies, one to cover her accounting practice and one to cover her real estate activities.

Common Policy Endorsements

A policy endorsement is an amendment to an insurance policy that adds, modifies, or excludes coverage. Once a policy endorsement is amended to the insurance policy, it becomes part of the legal insurance contract. Unless the policy endorsement specifies a specific term for which the endorsement is valid, it will typically remain part of the policy even through policy renewals. Endorsements to a stand-alone professional liability insurance policy are rare. Generally, there isn't much need for them. However, there are two endorsement related situations that should be considered: 1. E&O/Professional Liability Coverage as an Endorsements Some insurance companies do offer a professional liability insurance endorsement, normally added to the insured's CGL or BOP policy. The coverage will be similar if not identical. However, using the endorsement method can confuse and/or limit the total coverage available for the E&O/professional liability exposure. 2. Excess/Umbrella Policies At times an excess liability (often called an umbrella) policy may be available that will extend the liability coverage afforded by the professional liability policy. However, you should be aware, these are becoming increasingly harder to obtain.

Policy Limits

A policy limit is the highest amount the insurance carrier will pay for a loss in a given policy term. Compared to other commercial insurance policies, an E&P/Professional Liability policy is considered to be simple, with an each claim limit and an aggregate limit. These limits and other financial obligations of the insured are discussed below. Note: An "each claim" limit might be called a "per occurrence" limit depending on the policy form. 1. Each Claim Limit This limit is the most that an insurance carrier will pay for any claim or loss regardless of the number of claimants. Example Lydia, an insured accountant, has an each claim limit of $1,000,000. Lydia incorrectly prepares financial documents for her client, Michael. This affects both Michael, and one of Micahel's business associates (who is not a customer of the insured accountant). The each claim limit would apply to Michael and his business associate. This means, that as two injured parties, they would have to split the each claim limit of $1,000,000. There would not be $1,000,000 available for each of them. 2. Aggregate Limit (Policy Period Limit) Aggregate limits are the most the insurance carrier will pay for all claims during the policy period. Once an insurance carrier pays the full amount of the aggregate limit, the carrier has no further obligation to pay claims costs for the insured. Example Remember Lydia? If Lydia's policy had an aggregate limit of $1,000,000, and a total of $1,000,000 had already been paid to Michael and his business associate during the first claim, the policy would not pay anything further for any other claims that might be filed within the same policy period. However, if Lydia's aggregate limit was $2,000,000, the policy would provide another $1,000,000 of coverage for other claims filed during the policy period.

Send the Submission

A submission is a specific collection of documents provided to an insurance company allowing them to write an insurance policy. It is important that the submission is both accurate and complete. It is what determines the insured's policy premium or, in some cases, whether or not an insurance company will even consider releasing a quote. Currently, standardized online submission systems are not utilized for Professional Insurance Lines. Like most Professional Lines submissions, E&O submissions are primarily sent through email. The submission includes two types of documents: 1. Currently Valued Loss Run Reports 2. Completed Application

Create and Present the Proposal

After receiving and reviewing the released quotes from the insurance companies, select the quote with the best pricing and coverage for your proposal. Every insurance proposal is structured differently; however, the following should be included in each one: Details for what is covered and excluded Pricing breakdown for the needed coverage Explanation regarding the payment terms Signed paperwork from the insured It is your responsibility to accurately reflect what is on the quote in the proposal. If done incorrectly, your agency could lose an account or create an errors and omissions exposure. Most often proposals should be presented to the insured in person by the producer. If this is not possible, proposals can be sent to the insured via email or mail. Proposals not presented in person should still be discussed verbally with the insured.

Policy Checking

After the insurance carrier binds coverage for the insured, the insurance carrier issues the policy within two to four weeks. In most situations, the customer service representative will be sent the policy before it is sent to the insured. It is critical to check the policy for accuracy and resolve any discrepancies with the insurance carrier prior to sending the policy to the insured. Policy checking involves reviewing the three documents that should contain identical information: 1. The QUOTE, including revisions, provided by the insurance carrier 2. The PROPOSAL provided to the insured 3. The POLICY being issued

Deductible

An amount the insured is responsible to pay an insurance carrier for each covered loss. NOTE: The deductible is typically not subcontracted from policy limits.

Which occupation would need an E&O/ professional liability insurance policy?

An engineer

Reserve (aka reserve losses)

An estimated amount set aside to cover an open claim's potential future expenses.

Common Exclusions

An exclusion is language in an insurance policy that, instead of adding or modifying coverage, removes coverage from the policy. This is sometimes built into the policy language itself, but oftentimes by endorsement. If the excluded coverage is necessary for the insured, the insured can sometimes negotiate for the exclusion to be removed from the policy. The ISO Professional Liability Insurance policy contains 22 exclusions from coverage. Some of the exclusions are common to other commercial Property & Casualty (P&C) policies while many are unique to E&O/Professional Liability policies. Exclusions 1. (1) Abuse or Molestation 2. ) Access or Disclosure ofConfidential or PersonalInformation and Data-Related Liability 3. (3) Antitrust 4. (4) Bodily Injury and Property Damage 5. (5)Breach of Contract and Assumed Liability 6. (6) Breach of Warranty, Guarantee or Promise 7. (7) Business Enterprise 8. (8) Employment Practices Violations and Discrimination 9. (9) Fees, Costs, Charges or Estimates 10. (10) Fraudulent, Criminal, Malicious, Dishonest or Intentional Acts 11. (11) Fungi or Bacteria 12. (12) Governmental and Regulatory Authority 13. (13) Improper Use of Funds 14. (14) Insured vs. Insured 15. (15) Intellectual Property 16. (16) Personal Injury 17. (17) Pollution 18. (18) Prior Notice 19. (19) Prior or Pending Litigation 20. (20) Recording and Distribution of Material in Violation of Law 21. (21) Statutory Violations 22. (22) Workers' Compensation and Similar Laws

Currently Valued Loss Run Reports

An insured's policy history is another critical piece of information an insurance carrier needs to accurately calculate a policy premium. A loss run report provides insurance carriers with an insured's specific policy period history. Insurance companies use loss run reports to better assess the risk of an insured and typically use the last five policy periods in their policy premium calculations.

Wrongful Act

Any actual or alleged act, error, misstatement, misleading statement, omission, neglect, or breach of duty that is committed or attempted in the performance of the professional services listed on the policy declarations.

Interrelated Wrongful Act

Any group of "casually" connected wrongful acts that arise out of the same facts, circumstances, or allegations.

A professional liability insurance policy will cover the insured for wrongful acts:

Anywhere in the world

Legal Action Against Us

As in all ISO forms, the insured may only pursue legal action against the insurance company if the insured has complied with all terms of the policy. The ISO Professional Liability Insurance policy also states that no person or entity has a right to join the insurance company as a party in a suit under the policy.

The CSR Support Cycle

Customer service representatives (CSRs) are vital to the insurance industry. Regardless of whether or not an insured is a potential or current client for an insurance agency, CSRs provide necessary service and support. CSR duties may vary from one company to another; however, the steps involved in placing insurance policies and supporting insureds remain the same. We refer to these steps as The CSR Support Cycle. The CSR Support Cycle involves eight major steps: 1. Obtain Required Submission Information 2. Complete Submission Forms 3. Send the Submission 4. Receive and Review Quotes 5. Create and Present the Proposal 6. Bind Coverage with the Insurance Company 7. Check the Policy 8. Support the Insured

Types of E&O/Professional Liability Policies

E&O/Professional Liability Insurance policies can be written on a claims-made basis or on an occurrence basis. Claims-Made -In claims-made E&O policies, a retroactive date is listed in the policy declarations. Because policy coverage is triggered when the claim is made and not when the wrongful act occurred, all claims must have occurred after that retroactive date and must be made during the policy period. If no retroactive date is listed, or the retroactive date is the policy issue date, there is no coverage for any prior pollution events. Occurrence An occurrence-based policy requires that the event causing the pollution liability must occur during the policy period. While claims-made policies are more common, both claims-made and occurrence policies may offer an extended reporting period during which claims may be made.

Which of the following is available to any insured after the expiration of the policy period if the policy is terminated or replaced?

Extended Reporting Period

True or False. People and organizations that purchase professional liability insurance do not need to purchase extra liability insurance such as CGL or BOP policies.

False

Extended Reporting Periods

For E&O/Professional Liability policy forms, an extended reporting period is allowed under certain circumstances. This is a 60 day reporting period where claims that occurred during the policy period can still be reported. The 60 day reporting period is at no additional cost, but the error or wrongful act must have occurred during the policy period. When a policy period ends, one of three things will occur. 1. Policy Renews If the insured renews the policy with the current insurance carrier and the same terms, the extended reporting period does not apply as it is not needed. A claim that occurred at the end of the last policy period could still be filed. 2. Policy is Terminated If the policy is terminated for any reason or by either party except for the case of non-payment of premium due, the policy will automatically include a 60 day extended reporting period. 3. Carrier Replacement If the policy is changed, either by changing policy limits or terms with the same insurer or by moving to a different insurer, the policy will automatically include a 60 day extended reporting period.

If an insured rejects a settlement offer that is acceptable to both the insurance company and the injured party, which elements of the ultimate claim settlement would the insured be responsible for paying?

Half of the amount that the final judgment or settlement exceeds the original settlement amount PLUS half of the amount that defense costs exceed the defense costs incurred at the time of the original settlement offer.

Mergers

If a named insured merges with another company and either... 1. The named insured no longer exists after the merger; or 2. Another entity ends up owning either more than 50% of the new entity or more than 50% of the voting rights for directors of the new entity, then:

Acquiring Entities and Creating Subsidiaries

If a named insured: 1. Acquires another organization through a merger or consolidation, or 2. Creates a new subsidiary by acquiring a new entity The new entity will have coverage under the policy but only from the date of the merger or acquisition forward. They will not have coverage for incidents that occurred prior to the merger.

Improper Use of Funds

Improper Use of Funds The policy will not cover claims relating to the insured's theft or other conversions of funds to which the insured is not entitled. For example, if an attorney steals money from a client's trust account, that is not covered.

Extended Claims Reporting

In Professional Liability Insurance policies, a claim is considered filed on the earlier of: - When notice of the claim is received and recorded by an insured. - When notice of the claim is received and recorded by the insurance carrier. This means that whether a claim is made to the insured company or the carrier, it will still be considered filed on that date. This can be important because most Professional Liability Insurance policies are claims-made policies, and claims must be submitted during the policy period stated on the policy declarations. So what happens when a wrongful act occurs on the last days of the policy period and a claim can't be filed in time?

Run-Off Coverage

In certain cases involving changes in the nature of the business through mergers, acquisitions, or termination of subsidiaries, the insured can also purchase a longer extended reporting period but will have to pay an additional premium for this coverage. When this longer option is purchased, it is referred to as "Run-Off Coverage." Run-Off Coverage cannot exceed six years from the end of the policy period.

Request Information

In order to process an E&O quote, insurance carriers are likely to request two primary pieces of information. 1. E&O Application 2. Currently Valued Loss Run Reports 1. E&O Applications E&O applications provide the majority of information needed for an insurance carrier to write a policy. Either the producer or the customer service representative will send the E&O application via email to the insured for them to complete. E&O applications vary widely by carrier, however, most request similar information. E&O applications will be covered further in the application overview lessons. 2. Loss Run Reports An insured's policy history is another critical piece of information an insurance carrier needs to accurately calculate a policy premium. A loss run report provides insurance carriers with an insured's specific policy period history. Insurance companies use loss run reports to better assess the risk of an insured and typically use the last five policy periods in their policy premium calculations. Loss run reports will be covered in the next lesson.

Prior or Pending Litigation

Likewise, any pending or prior litigation (meaning prior to the policy period or retroactive date, whichever is earlier) would not be covered.

Requesting Loss Run Reports

Loss run reports must be requested from the insurance carriers who wrote each of the insured's policies over the last five policy periods (if applicable). In order to release the information, the insurance carriers need to receive an agent of service authorization letter from the insured. The letter provides permission for the insurance carrier to release the insured's loss run data, most often, to the insured's current agent of record (you). The insurance policy carrier is bound by law to provide the loss run report within a certain period of time (dependent on the state). This is state-regulated to ensure that the insured has the freedom to shop for more affordable insurance policies.

Paid (aka paid losses)

Losses paid to claimant during the reported period.

Coverage Enhancements

Normally the insured must pay the retention amount on the policy declarations page before any coverage will apply in a professional liability insurance policy. However, the ISO form (and others as well) includes three situations in which retention is not required. Called "Coverage Enhancements," these coverages do not require retention: 1. Defending an insured in disciplinary proceedings for a wrongful act For example, if an insured stockbroker is facing disciplinary proceedings from the Securities and Exchange Commission (SEC), the policy will pay the defense costs. But remember, this is only the case if the insured is accused of a wrongful act as defined in the policy. 2. Defending an insured in licensing proceedings The policy will pay for the defense in a proceeding that involves the retention or revocation of the insured's license to engage in the professional activity. Note - there is no requirement that a wrongful act be involved here! 3. Subpoena assistance for wrongful acts The policy will pay the costs to investigate, appeal, or defend a legal subpoena received by the insured where a wrongful act as defined in the policy is alleged.

Reviewing Quotes

Quotes provide an accurate summary of pricing and coverage from the insurance company. Most often, quotes are made available to customer service representatives 14 to 30 days prior to the insured's current policy expiration date. Quotes will be received via email from the underwriter or the wholesaler. Retroactive Date The retroactive date of this policy is the same month and day as the effective date of this policy but is three years earlier than the current policy effective date. This usually means the insured has had the same policy with the same carrier since that retroactive date. Any claims that occurred on or after 3/7/2018 can be reported during this current policy period. Limits The liability limits section of this quote provides the 'each claim' limit and the aggregate limit for all claims as well as the limit of liability for each type of expense event both by 'each expense event' and the aggregate limit for each expense event type. Note that the coverage enhancements (listed as expense events) do not have deductibles. Premium Quoted The premium is the amount your insured will need to pay to the insurance company in order for the policy to take effect. Knowing which quotes have the lowest premiums will be an important factor when providing a proposal to the insured. Extended Reporting Period Options If a policy is canceled or non-renewed, an insured can purchase an extended reporting period. Policy Forms and Endorsements On all quotes, you will find a list of policy forms and endorsements that are included in the policy. Ensuring that all requested forms and/or endorsements have been included is important and can make a significant difference to an insured if a claim arises

Policy Conditions

The Conditions section of an Errors and Omissions/Professional Liability policy sets up procedures that must be followed during the claims process and other interactions between the insured and the insurer. As discussed previously, E&O/Professional Liability Insurance policies differ between insurance carriers and the conditions included in the policies may be different as well. 1. Assignment The insured under the policy may not assign the protection under the policy to anyone else without the written permission of the insurance company. 2. Bankruptcy The bankruptcy of the insured does not change the obligation to defend and pay claims on behalf of the insurance carrier. 3. Cancellation and Non-Renewal Like most Property and Casualty (P&C) insurance policies, an E&OP/Professional Liability policy may be canceled by the insured at any time and for any reason. The insurer can only cancel in certain circumstances. The reason for cancellation will dictate the required time for notice of cancellation. A 10-day notice of cancellation is required for non-payment of premium A 30-day notice is required for non-renewal (termination of policy at policy anniversary by the insurance company) A 60-day notice is required if the insurance company cancels for any other reason If a cancellation does occur - regardless of who initiated it - any unearned premium will be returned to the insured. If a policy is canceled for non-payment of premium, there is no unearned premium to return.

Other Insurance

The Other Insurance condition often varies from policy to policy. In the ISO Professional Liability Insurance policy, the policy is considered excess over any other applicable insurance. If no other applicable insurance is available, then the professional liability policy is primary. The only time this rule is different is if another policy expressly states that it is to be considered excess over the professional liability insurance policy. Note: The only time this rule is different is if another policy expressly states that it is to be considered excess over the professional liability insurance policy.

Defense and Settlement Provisions

The Professional Liability Insurance policy, even non-ISO versions, will include a duty to defend. This means that the policy will pay for the defense of any claims even if they are frivolous and found to be without merit. Inside the Limit Sometimes costs related to a defense are outside or in addition to the other policy limits. However, in most E&O/Professional Liability Insurance policies, the defense costs are within or included in the policy limits. This means that if the "each claim" limit on a policy is $1,000,000, the policy will pay up to $1,000,000 for both the defense and claim settlement/judgment. Settlement Provision The policy gives the insured the right to reject any settlement offered by the insurance company to an injured party. If the insurance company wants to offer $500,000 to settle an errors and omissions claim, and the injured party indicates that the $500,000 figure is acceptable, the insured may still reject the $500,000 offer. Insureds will do this sometimes when they believe strongly that they have done nothing wrong.

Indemnity

The coverage amount provided to the claimant for damages incurred due to the occurence

Status

The current state of the claim (open claim vs closed claim)

Business Enterprise

The policy will not cover claims made by any organization (business enterprise) which was directly or indirectly owned, managed, controlled, or operated by any insured or the spouse of any insured. The policy will not cover claims made by any organization in which ownership or control is more than 10% by any insured or any insured's spouse.

Access or Disclosure of Confidential or Personal Information and Data-Related Liability

The policy will not cover damages caused by the improper or illegal release of private information such as health conditions, identification numbers, etc. This includes releases of personal information by a computer system. That exposure would need to be covered by a cyber liability insurance policy.

Breach of Contract and Assumed Liability

The policy will not cover damages claimed due to a breach or alleged breach of a contract to which the insured is a party. It also will not cover any liability that is assumed by the insured, contractually or otherwise, from another non-insured party. This can seem tricky however, because the policy will still cover the insured in a situation where both the insured and a non-insured (whose liability is contractually assumed by the insured) are sued by a third party alleging that both the insured and non-insured were professionally negligent. This is because the insured would (1) have been liable even in the absence of the contract with the non-insured and (2) the insured would have coverage under the policy in the absence of the contract with the non-insured. Example Architect Kate agrees by contract to pay any liability occurring as a result of a transaction between her and CAD master Stephen. Kate is then sued by Lao, a third party in the transaction, alleging that both Kate and Stephen were professionally negligent. Even though Kate assumed liability for Stephen, the policy will still cover Kate, because she would have been liable under the suit by Lao irrespective of the contract with Stephen and she would have had coverage under the policy for this type of claim.

Employment Practices Violationsand Discrimination

The policy will not cover employment practices such as hiring, firing, etc. Those should be covered under an Employment-Related Practices Liability Insurance policy.

Bodily Injury or Property Damage

The professional liability insurance policy is designed to protect against errors made by professionals. It will not cover any resulting bodily injury or property damage as a result.

Breach of Warranty, Guarantee or Promise

The professional liability insurance policy will not cover damages or claims that result from the insured's breach of a warranty, guarantee, or promise. For example, if an attorney guarantees he can secure a client a settlement and is unable to do so, there is no coverage - unless a wrongful act was also involved.

E&O Application for Insurance Industry

The secret to completing applications is understanding why questions are asked. By understanding the reasons an underwriter wants to know information, you will be much more proficient in completing the application. You will realize just what is important and what isn't so important. In this lesson, you will learn the structure of the Errors and Omissions - Insurance Application for the Insurance industry. We will also discuss the reason behind each question, and provide a few tips for completing the application along the way.

Subrogation

This condition allows the insurance company to subrogate against other at-fault parties to seek to recoup payments it makes under the policy. Note: In insurance, subrogate means to legally pursue a third-party responsible for the damages.

Representations and Severability

This condition states that by accepting the policy, the insured is representing to the insurance company that all information provided during the application process is true and can be relied upon. The policy may be considered void if a principal insured, like the CEO, CFO, in-house counsel, managing partner, etc., has intentionally concealed or misrepresented any facts during the application process. However, the insurance company can decide to either terminate the coverage with respect to just that particular named insured or to the whole organization.

Personal Injury

This exclusion is related to actions that are covered under the "Personal and Advertising Injury" section of the CGL and BOP policies. In general, the E&O/Professional Liability policy will NOT cover: 1. False Arrest, Detention, or Imprisonment - The act of unlawfully detaining an individual on unsupported accusations that the person has committed a crime. 2. Malicious Prosecution - The act of initiating a criminal prosecution or civil suit aginst another party with malice (ill will) and without legal or factual justification. 3. Wrongful Eviction or Wrongful Entrt - The act of wrongful eviction or wrongful entry into a private dwelling that an individual occupies, committed by or on behalf of the insured. a. Eviction is the physical removal of a tenant and their possessions from a rental dwelling. b. Legal evictions require specific processes that vary by state, involve the courts, and cost more money. c. Unlawful eviction means that the insured/their representative did not follow the applicable landlord/tenant law regarding entry/eviction. 4. Slander or Libel - Oral or written publication of material that defames a person/organization or puts down their products or services. a. Slander - oral, untrue statements that can damage a reputation b. Libel - written, untrue statements that can damage a reputation

Professional Services

This will be defined on the policy declarations for each particular profession.

Who is an Insured?

Unlike most other policy forms, the ISO Professional Liability Policy does not include a separate section entitled "Who is an Insured." Instead, the ISO form defines the insured in the definitions section at the end of the policy. Insured Organization -The organization itself is listed on the policy declarations as the named insured. Insured Persons -Insured person includes any employee of the organization or any: Partner Director Officer Board Member Subsidiary companies of the insured organization In addition, the ISO policy includes a section entitled "Section VII - Coverage Extensions" that, in effect, broadens the definition of an insured further. The policy will cover claims for wrongful acts (as defined in the policy) allegedly made by an insured person even if the claims are made against: Spouse/Domestic Partner - The spouse or domestic partner of the insured person solely due to the relationship as a spouse or domestic partner or solely due to the spouse's or domestic partner's ownership interest in the insured person's property The Estate - The estate, heirs, legal representatives, or assigns of an insured person if the insured person is deceased The Trust -A trust of an insured person including any trustees of the trust.

Fraudulent, Criminal, Malicious, Dishonest or Intentional Acts

While this exclusion is included in all P&C policies, it goes even further in an E&O/Professional Liability policy. As always, any intentional, deliberate, fraudulent, criminal, malicious, or dishonest act is excluded from coverage. However, the policy will still provide defense costs for these actions. As always, any intentional, deliberate, fraudulent, criminal, malicious, or dishonest act is excluded from coverage. However, the policy will still provide defense costs for these actions. The exclusion applies to any named insured but will also apply to an insured organization if the CEO, CFO, COO, general counsel, partner, or member of the board or equivalent either committed the conduct himself/herself. The exclusion will apply to an individual insured person who either: personally commits the act, personally participates in the act, personally acquiesces to the act, or remains passive after having personal knowledge of the act.