Frequently Asked Questions


(This information is intended as a general overview.  Review any insurance policy for its actual coverage terms, conditions and exclusions.)




Are all professional liability policies alike?


No, professional liability policies can be very different, even when looking at policies that cover the same profession.  For example, professional liability policies that cover accountants can vary greatly on the professional services covered.  Some might cover just tax and bookkeeping while others can include any service you perform for some type of payment.  In addition, the exclusions, what is considered a “claim”, and who is considered an insured – to cite just a very few other policy terms – can differ.




Do more exclusions in a policy mean less coverage?


Not necessarily.  For example, a policy that has a very broad definition of professional services may have more exclusions than a policy that narrowly defines professional services.  The former limits coverage by way of the exclusions while the latter limits coverage by way of the policy definitions.  A policy always has to be reviewed as a whole to determine how much and what type of coverage you have.




When should I report a claim or possible claim?


As soon as you become aware of a claim, or are aware of a circumstance that you feel could result in a claim down the road, you should report it.  To not do so could jeopardize your coverage under the policy.




What is meant by “defense costs?”


Defense costs (sometimes called claim expenses) are the court costs, attorneys’ fees, etc. that are incurred to defend you or assist you in settling a claim brought against you.  Most policies will define the term under the Definitions section in the actual contract.




What does “defense costs in addition to the limit of liability” mean?


Sometimes you will hear the phrase “defense costs in addition to the limit of liability”,  “claims expenses outside the limit of liability”, or something similar.  If your coverage has this feature, it means that costs to defend you (see above) will not reduce the limit of liability you purchased to pay the claimants.  How much of a limit you can get for defense costs can differ among insurance companies.  In addition, some companies put no limit on the amount available for defense costs.




What is a “loss only” deductible?


Some companies offer different options for your deductible.  Not only can they differ in the amount of the deductible, but to what the deductible applies.  A “loss only” deductible (also referred to as “first dollar defense”) means your deductible applies only to that portion of the total claim paid for the judgment or settlement of the claim.  No deductible applies to the claim expenses incurred to defend you.  So, for example, if you were sued and won so that the claimant received no judgment or settlement, you would pay no deductible.  Even though the company may have spent money to defend you, your deductible applies to the loss portion of the claim only; since no loss was paid, you pay no deductible. 


The other option – usually called a loss and expense deductible - is to have the deductible apply to loss AND defense expenses up to your total deductible amount.




What does a prior acts date mean?


If your policy carriers a prior acts date – also called a retroactive date – it means that claims arising from the services you performed before the prior acts date are not covered.




If my policy does not have a prior acts date, does that mean I have coverage back to when I first started my profession?


Not necessarily.  The policy has to be read as a whole.  Even if the professional services covered under the policy are the services you only performed for your career to date, you have to look at how the policy defines who is an insured.  For example, if you went through some mergers, you need to see how the policy defines “predecessor firm.”




Besides looking at the policy coverages, is the only other deciding factor price when purchasing insurance?


Far from it.  Although insurance is a non-tangible commodity, you should approach its purchase as you do a tangible.  When purchasing a computer for example, maybe you would compare two brands.  You see that they both give you the features you want.  However, you know that one computer manufacturer will be there if and when you have a problem and they will do everything they can to satisfy you.  You might even be willing to pay more for this computer because of their service.  The same is true with insurance.  Like a computer, you can always find cheaper, but the cheapest is not always the best in the long run.