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
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”
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
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
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
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.