finance 431 professional liability. historically only covered liability from professional services...
TRANSCRIPT
Finance 431
Professional Liability
Professional Liability
Historically only covered liability from Professional Services to others Medical malpractice
Doctors Errors and Omissions
Accountants Lawyers Engineers and Architects
Professional Liability
Today, more widely considered for a number of organizations Directors and Officers liability Fiduciary liability Employment practices
Professional Liability
Loss exposures
Occurrence v Claims made
Settlement conditions
Defense costs
Deductibles and self insured retentions
Other factors
Professional Liability
Loss Exposures CGL excludes most professional liability loss
exposures Focus is on professional services exposures not
on same type of exposures as CGL Not focused on premises or bodily injury or
property damage Unique exposures and underwriting considerations Generally written by companies well experienced in
the business- a real specialty business
Professional Liability
Occurrence v Claims Made Coverage Professional Liability frequently written on
claims made basis Losses tend to be large Infrequent Often difficult to know if premium is adequate
May pay claims years after receipt of premium
Professional Liability
Claims made coverage What does that mean ?
Professional Liability
Claims made coverage …covers liability claims that are made or submitted during the policy period for covered events that occur on or after a retroactive date and before the end of the policy period. Helps to know claims for any given year Can provide extensions to time period for the
insured
Professional Liability
Settlement Conditions Underwriters want the right to settle out of
court without the consent of the insured May or may not have that right in policy
Professional Liability
Defense Costs May be paid in addition to policy limit May have significant impact on max loss if
separate
Professional Liability
Deductibles and self insured retentions Large deductibles are common Self insured retentions common
$ 10,000 plus Participation in loss provides incentive for
prevention
Professional Liability
Other factors Social and legal trends real factors
Corporate scandals Wall Street Accountants
Litigation growth Economic issues Industry issues
Medical malpractice Merger and acquisition
Employment practices liability
Professional Liability
Directors and officers liability-insurance and indemnification Indemnification
D & Os are reimbursed by corporations for Legal costs Settlements Judgments Fines
Professional Liability
Directors and Officers Liability-legal background Liability to shareholders under state
incorporation laws Duty of care
Make informed decisions Business Judgment Rule
Duty of loyalty Ensure decisions are in the best interests of all
shareholders when a conflict exists
Professional Liability
Directors and officers liability-legal background Liability to shareholders under securities laws
( federal and state) Disclose material information in timely manner
Types of suits Derivative – on behalf of corporation Direct actions-on plaintiffs’ behalf
Individual Class
Professional Liability
Directors and officers liability D& O insurance covers
Losses not indemnified by corporation Indemnified losses paid by corporation Common exclusions
Illegal personal profit Willful misconduct
Professional Liability
Directors and officers liability Incentives to settle securities class actions
Merit of securities class actions
Professional Liability
Fiduciary liability Employee Retirement Income Security Act of
1974(ERISA) Fiduciary liability to pension plan beneficiaries Individuals responsible for investment, control or
disposition of assets held by plan May be held responsible for errors and omissions of
outside entities that provide admin and related services
Professional Liability
Fiduciary liability Fiduciary liability insurance
Covers legal liability including defense costs Generally written as stand alone
Other related coverages Fidelity and Surety bonds Employee Benefit Liability (EBL) Insurance
Professional Liability
Employment practices liability Mergers and acquisitions Experiences in dealing with disgruntled
employees
Professional Liability
Personal experiences D & O
Board of directors Concerns Exposures Coverage availability
Agents E & O Metropolitan v rural areas
Accountants E & O Metropolitan v rural Large audit client v smaller business Audit work v tax practice
Professional Liability
Next class