Professional Liability Coverage - IOAPROS

Professional Liability Coverage

PROFESSIONAL LIABILITY
COVERAGE

John reviewed and walked us through our existing policies and explained areas of potential improvement with a clarity we had not experienced with our existing global insurance broker. He quickly familiarized himself with our business model (something no other broker we had ever worked with seemed able to do) and then offered insight into and helped us navigate the insurance questionnaires with a sharp understanding of an insurance underwriter’s psyche.

Carlos de Oliveira, M.A.Sc., P.Eng.
President and CEO

PROFESSIONAL LIABILITY POLICY

WHAT TYPE OF PROTECTION DOES PROFESSIONAL LIABILITY COVERAGE PROVIDE?

Professional liability insurance protects your firm from claims alleged to have been caused from its professional service activities. The policy pays for claim-related (1) legal costs and (2) damage payments when found liable for bodily injury, property damage or economic losses.

This differs from commercial general liability policies, which limit coverage to bodily injury and property damage claims from non-professional service activities.

FAQ’s

Most policies cover a list of professional services that your business is legally qualified to perform in their capacity as an architect, engineer, landscape architect, land surveyor, construction manager, interior designer, technical consultant, or as otherwise listed by endorsement to the policy.
Typically, the “named insured” is your firm and predecessor firm names, in-addition to past or present directors, officers, employees, and leased personnel if named in a claim. Policies also generally cover liability arising from participation by your business in joint ventures.
Professional Liability insurance safeguards your business from catastrophic loss in the event of a lawsuit, covering both legal expenses and sums paid as judgments, awards, or settlements. Even baseless claims against your business can require a legal defense. Protecting your business reputation can require significant funds and can even bankrupt your business.
As long as there is a claims-made policy in force at the time the claim is made and that policy provides coverage for prior acts, there would typically be coverage.
Most professional liability policies are designed to apply on a “claims made” basis. This means that a claim must be made and reported within the policy period, but not to exceed a reasonable period of time after the policy period expires. These policies list a specific date, often called a “retroactive date”, that becomes very important. Claims that arise out of acts committed prior to the retroactive date will not be covered. The farther back the retroactive date, the more coverage provided.

Insurance company Underwriters evaluate several factors in preparing quotations, such as:

  • Policy limit and deductible requested

  • Number of licensed professionals

  • Number of years in business

  • State(s) where business is conducted

  • Professional service activity billings (prior 3-5 years)

  • Difference between projected annual and actual billings (at policy renewal)

  • Mix of professional disciplines, project types and clientele

  • Project delivery methods

  • Use of sub-consultants

  • Quality control, including use of written contracts

  • Office policies, procedures and training activities

  • Claim experience

Frequency of claims by claimant (2010-15 Travelers Survey)

  • 30.5%   Private Owners/Users

  • 21.1%    Design Professionals

  • 16.1%    Developers

  • 12.3%   State or Local Government

  • 8.9%     General Contractors

  • 7.6%     Public Institutions

  • 3.5%     All Others