Today, claims of “negligence” are filed more frequently than ever before. This is bad news for professionals because the failure to provide reasonable service can be cited in many situations. Negligence may be claimed in conjunction with a mistake, an oversight, or a failure to deliver services in accordance with standards established by peers.
In the past, most doctors, lawyers, architects, and engineers had to worry about the implications of negligence and protect themselves from potential lawsuits. But times have changed. Today, broad ranges of professionals need to think about the financial protection offered by insurance. Professional Liability Insurance (also called Errors and Omissions Insurance) may provide a solution.
Disgruntled customers/clients/patients can file a claim against you or your business whether it is legitimate or not.
In such situations, it is not uncommon for plaintiffs to sue multiple parties, despite their level of involvement in the particular situation.
Legal fees, not to mention lost working hours, can be costly. Professional Liability Insurance can help cover these losses and expenses, as well as those incurred by judgments or settlements.
Professional Liability Insurance covers omissions, errors, misleading statements, breaches of duty, and other like claims arising from services rendered.
The terms, rates, and conditions of Liability Insurance vary among issuing companies, policies, professions, and locations.
It’s very important to thoroughly understand the policy’s terms and conditions before purchasing insurance, and long before a claim arises.
Some key policy issues include the following:
Are claims filed by governmental or regulatory agencies covered?
What is classified as a triggering event? Will a written demand, an allegation, or the service of papers constitute the acceptance of a claim?
Is there compensation for working hours lost to legal proceedings?
Is there a deductible involved, and how does it relate to legal fees?
While most policies are offered only as Claims-Made Policies, you may be given a choice between two types of coverage.
Occurrence Policies cover an incident that occurred during the policy period, regardless of when the claim is filed.
On the other hand, Claims-Made Policies cover claims meeting two conditions: the incident occurred during the policy period and the claim was made during the policy period.
Claims-Made Policies provide coverage for incidents that have occurred and for which claims have been made between the policy’s inception and expiration dates.
Claims that occurred prior to policy issuance may be covered by “prior acts” coverage, which is included in some policies.
However, even this is restricted by a retroactive date, before which incidents are not covered.
Liability limits are determined by the level of coverage at the time the incident occurs.
If you cancel a Claims-Made Policy, extended reporting periods (or “tail coverage”) can be purchased to extend the discovery period, during which time notice of a covered claim may be filed.
Extended discovery periods may be available for anywhere from six months up to seven years. The cost of tail coverage can be high, and consequently, Occurrence Policies, when available, may be preferable.
Occurrence Policies provide coverage for incidents that occur during the policy period, regardless of when they are reported.
For example, if you had an Occurrence Policy in effect from 2006 through 2009 and a claim for an incident occurring in 2008 wasn’t filed until 2010, coverage would be provided.
This policy would provide coverage indefinitely for any incidents that occurred during the dates of coverage.
This policy does not require tail coverage because premium rates reflect the ability to report claims indefinitely for events that transpired during coverage dates.
Effective liability limits are those that are in place at the time the incident occurs, regardless of when the claim is made.
Unfortunately, we can’t always prevent negative situations or predict the reactions of others to our business actions, products, or services. Mistakes can be made just as easily as clients can make false accusations.
Therefore, it is up to you to protect yourself and your livelihood. Doing so may just be your best business move to date.
One of our qualified insurance professionals would be glad to help you understand the complexities of Professional Liability Insurance.
Secure the BEST