Professional liability insurance offers protection from mistakes, errors and omissions, and negligence that may result in claims over financial loss, property damage, physical injury, or harm to a client’s reputation. Brokers and clients must work together to identify insurance needs as the impact of social inflation on the professional liability market demands the need for greater coverage. Proper insurance can protect against financial losses and allow the business to continue operating even if faced with a lawsuit.
Understanding the Evolving Professional Liability Landscape
Professional liability insurance rates are on the rise as businesses face greater risks due to social inflation and other challenges. Legal intervention is becoming increasingly common, along with bigger awards given as damages. These trends have made the cost of resolving claims higher, leading to social inflation’s ripple effect on insurance markets.
Another complication is the rising claim numbers for errors and omissions (E&O), leading to significant tightening in terms of E&O coverage and rising premium costs. Two driving forces behind the elevation in errors and omissions claims are staff turnover and training. A constant turnover of new staff members leaves a company exposed if they fail to implement proper procedures regarding training and account knowledge. Other reasons behind this trend include increased workloads, poor claims service, and carriers suing the insurance agent after paying out the insured’s claim.
COVID-19 has also played a part in the evolution of professional liability insurance, particularly on directors and officers (D&O) liability and employment practices liability insurance (EPLI). The increased prevalence of employees working from home and the associated risk of cyber attacks combined with concern over disclosure of COVID-19 safety practices has opened directors and officers to more lawsuits from employees claiming wrongdoing.
While insurance is always a business that comes with risks, these risks have increased dramatically in recent years. The higher prevalence of losses and ongoing volatility has raised rate adequacy concerns and restricted coverage for certain classes of business. Premium prices are unlikely to decrease significantly, but agents must find their clients the terms and conditions that make the premium price they pay worthwhile. These factors make it critically important that you aid your clients in selecting the coverage that offers them the greatest protection and value for their money.
Wide-Ranging Coverage Options
Professional liability insurance helps to protect your client’s assets and cover the costs associated with a lawsuit, in amounts up to the limits stated within the policy. It can include a wide range of coverages:
- EPLI is coverage for wrongful termination, breach of contract, wage violations, and other employment-related claims of wrongdoing.
- E&O insurance offers protection in case your client faces a lawsuit claiming they made a mistake in delivering their professional services that caused the claimant harm.
- D&O insurance provides protection for corporate officers’ personal assets if they are personally sued for wrongdoing in their company.
- Cyber liability insurance provides protection for cyber security issues like data breaches.
- Crime insurance protects against financial losses to your client’s business due to dishonest or criminal acts performed by employees.
Most professional liability insurance contains some exclusions, which can vary widely between insurance companies and policies. Common exclusions are:
- Bodily injury or property damage: A general liability policy typically covers these types of claims.
- Discrimination: These policies exclude discriminatory situations based on race, religion, age, disability, sex, marital status, sexual preference, creed, or national origin.
- Intentional wrongdoing: Liability policies don’t cover lawsuits that result from the insured knowingly providing bad advice or deceiving the client.
- Claims related to employment: Employment disputes such as wrongful termination or denial of a promotion commonly fall under a separate EPLI policy.
- Sexual abuse: Insurance for sexual misconduct is typically a separate coverage.
- Criminal acts: Illegal activities are another exclusion.
- Pollution: Professional liability insurance doesn’t cover claims over pollution or environmental liability.
- Prior knowledge: The insurer will likely deny claims involving Issues that the insured already knew about before purchasing the policy.
- Intellectual property infringement: Professional liability insurance does not cover claims where the insured used the intellectual property of another without permission.
- Geographic limitations: Most policies only honor claims made within a specified coverage territory.
Every client’s insurance needs are different. You must make sure the policy they purchase doesn’t contain any exclusions that could result in a denied claim. Ensure all parties fully understand the terms of the insurance contract and what is and is not included in their personalized policy.
Strategies for Agents and Brokers
The cost of professional liability insurance depends on your client’s industry, revenue, company size, common risks, claims history, and coverage limits. Understanding the specific risks unique to your client’s industry and operations is paramount to assessing their needs and helping them get the tailored coverage they require for greater protection and peace of mind.
Clients don’t want to face a denied claim due to hidden exclusions or come up short because the market trends inflated settlement costs beyond the expected. It’s crucial that agents and brokers stay informed about trends and adapt to changing client demands.
Partnering with Cochrane & Company gives you and your clients access to the company’s expertise and carrier relationships. Working together, we can ensure you deliver optimal insurance coverage options with flexible, favorable terms that keep your clients happy and their businesses secure from external and internal threats.
Choosing the Right Professional Liability Insurance
In today’s social climate, it’s not uncommon for a client to face a lawsuit that claims they caused some form of harm by a party seeking damages. The current issue with social inflation often leads to juries rewarding larger-than-usual settlements, making it critical to properly advise your clients on which coverages they require and in what amounts.
Help your clients find the right insurance solutions for their needs with Cochrane & Company. We are licensed in all 50 states and have more than 60 years of experience in delivering customized plans as our commitment to assisting agents in protecting their clients’ assets and reputations. Contact us today to speak with one of our professionals and explore comprehensive solutions that best serve your clients in a challenging insurance landscape.
About Cochrane & Company
For more than six decades, Cochrane & Company has been proudly at the forefront of the insurance industry. Our experience has enabled us to innovate in powerful ways, reimagining the E&S market, and providing technology solutions that make it easy to do business with us. Licensed in all 50 states, we proudly serve clients across the nation, providing personalized and powerful solutions to help you become an even better partner for your clients. Speak to one of our experienced professionals today by calling (855) 967-0069.
