General liability insurance protects you from claims that result from property damage or bodily injury. If the cause of the claim is a slip and fall, the coverage is obvious. If the claim is related to a decision you made, a design you offered, a calculation you performed or an interpretation of information you provided, the liability is not as clear. In these cases, your professional opinion or skill is the focus of the claim.
The traditional areas of professional insurance coverage cover engineers, architects, medical providers, attorneys, accountants, consultants, and similar professions. The professional exposure may extend to other areas such as building contractors who offer design services, manufacturers who design products, repair processes that require a redesign of re-engineering of a product. In these cases, you are exercising professional judgements and those judgements can be the basis for a claim. If you are required to have a specific license or carry a certification, those activities may be considered a professional exposure.
General Liability policies do not automatically exclude coverage for professional services.
When an insurance company wants to exclude professional services, they attach an endorsement to the policy to make this exclusion. Some companies may include this endorsement as a matter of course, others may apply it based on the exposures reported. When you review your insurance program, look at the list of forms attached to your policy. This is where you would find the exclusion form noted.
If you have a professional exposure, you need to have a professional liability policy added to your insurance program. The policies for these exposures are designed to address the specific issues related to your profession. There is no one size fits all program for this exposure.
Policy Terms and Conditions
Claims made vs. Occurrence
The first major difference for many professional liability insurance policies are they are “claims made” coverage forms. A typical GL policy is an “occurrence” form. An occurrence policy has lifetime coverage for the incidents that occur during a policy period, regardless of when the claim is reported. A claims-made policy only covers incidents that happen and are reported within the policy's time frame, unless a 'tail' is purchased. The “tail” coverage allows claims for incidents in the past.
This is a critical difference and the costs to obtain tail coverage can be significant. Lack of a tail cover can result in no coverage for a loss.
Professional liability policies declaration pages contain language that limits the policy to your professional practice. There are profession specific coverage forms; lawyers, architects, engineers, accountants, that reflect the norms of practice for that profession. Be sure to evaluate your work and the coverage limitations that may be present. Does the description of your operations on the declarations page cover what you do?
A typical General Liability policy allows the insurance carrier to settle a claim at their discretion. This allows the carrier control over the claim process. Since professional claims have a more personal impact on the insured, the insured has more control over the settlement of the claim. The carrier can exert control by including a “hammer clause.” This clause states that if the insured declines to agree to a settlement and the ultimate settlement is above what was rejected, the insured will pay a set percentage of that difference. This is a condition that you must identify and understand to properly assess coverage.
All policies provide defense costs. The difference is that in some policies the defense costs are “within” the limit of insurance. This means that the dollars to pay the claim are eroded by the defense expenses. Since defense costs can be significant, you should know if your defense costs are considered to be inside the limits of your policy.
Excess Liability Coverage / Primary Limits
Your commercial umbrella may or may not extend over your professional insurance. You may need to buy higher primary insurance limits or a separate excess policy over your professional exposures. Do not assume that your umbrella policy will cover professional exposures.
The Driehaus Difference
The terms and conditions of professional liability insurance are not your primary concern or interest. You are interested in your customers and clients. We understand the insurance products that would protect you and we can craft that coverage to suit your situation. This is not a simple process and requires additional information, special applications and knowing how to fit this into your overall program. Call us at 513-977-6860 or contact us via the internet at www.driehausins.com to get started on your professional liability program.