Professional Liability Insurance | How to Get It Right

Professional liability, which is also known as E&O or errors and omissions insurance, and in the medical field it's known as malpractice insurance. The intent of professional liability insurance is to protect a professional service business from claims that allege a wrongdoing that caused a financial damage to a third party. In other words, a professional screwed up something and a customer is suing them for that screw-up because it damaged them financially. Hi, I'm Gordon Coyle. Welcome to my channel where we talk about the risk and insurance issues on the minds of business owners. As an expert business insurance broker, these videos are intended to help guide and educate decision makers to help make you a more informed insurance buyer. If I don't answer the question on your mind that brought you to this video, reach out and let's connect. I'd love to hear from you. Oh, and if you do like this content, do me a favor and hit that like button. So, I briefly described what professional liability does. So, why do you need to talk about getting this type of insurance right? Shouldn't all insurance policies be correct or right off the shelf? Unfortunately, not. Most business insurance policies need to be tailored to a business's operations and the professional liability or E&O policy is one that needs to be significantly tailored to a client's needs. This past month, I reviewed several E&O policies and found serious issues in a handful of them that would make getting a claim covered very difficult, if not impossible. And the root of the problem in those policies was how professional services was defined. The definition of professional services in a professional liability policy is the most important element of that policy. In fact, most policy language starts with an insuring agreement or coverage grant that says something like, the insurer shall pay a loss on behalf of the insured resulting from a professional services claim. Professional services is a bolded term in the policy, which means it's a defined term. So, if you go to the definition section of the policy, you'll see that professional services is defined where it says something like, see item 6 in the policy declaration and usually item 6 is a description of what the insured does and what it offers their clients. So, how can this go sideways? Well, in one situation this month, the definition of professional services said it means market research services performed by the insured to clients for a fee. Unfortunately, this client was a digital market agency and not a market research firm. And for clarity, the term market research services was also a defined term in the policy and it did not correlate to the services that this client provided their clients. In another situation, the definition of professional services was an investment advisory firm. In fact, the policy was a unique policy form for investment advisors, but the insured had shifted their operations from operating like a VC fund to being a consulting firm several years earlier. Why the policy form and definition of services was never changed is beyond me. The point in these examples is twofold. First, if you're an insured, you need to read your policies or at least go over them with your broker so you have an understanding of what you have and what you're getting. This is true for all types of business insurance policies, but especially true for unique coverage forms like E&O or professional liability. Second, it points to the need to work with a skilled specialist and not a generalist when it comes to complex policy forms like professional liability, cyber, D&O, employment practice liability, etc. I think in a lot of the errors I've seen this month, the broker handling the business before I got involved didn't know exactly what to look for, so they guessed or they thought, well, this is close enough. The problem is that it's not close enough and in a claim, the insurers in these examples that I gave you are going to deny coverage and that's not a great position you want to be in. You avoid this by starting off with the right policy so you don't end up paying claims out of pocket. Here's the bottom line. If your company is a professional services company, you need professional liability or E&O insurance. More importantly, you need insurance that's going to be tailored or customized to your specific needs and operations. I don't think you do yourself any favors by buying this type of insurance from a human list website where you answer a few questions and you get a quote. I also don't think it makes sense to work with a generalist either. It's too important for your protection to leave it up to anyone less than a specialist. After all, you probably consider yourself a specialist or uniquely qualified in your profession, so why wouldn't you expect the same from your insurance broker? If you're looking for a skilled broker that specializes in professional liability insurance and other unique coverage forms, then let's chat. We work with a wide range of professionals on their insurance needs and we'd love to have an opportunity to chat with you about your issues too. My contact info is in the description box below, so reach out. I'd love to hear from you. Thanks.