Professional liability policies are tricky business and are not to be trifled with (So Don’t Trifle With Them!).

Seriously though, many organizations do not take the time to examine the professional liability policy that they are purchasing.  Lawyers, Accountants, Dentists, Design, and many many other Professionals purchase a Professional Liability (Errors & Omissions or MalPractice) Policy without cardinal knowledge of what they are actually covered against.

I’ve asked this question before:

“Would you bet your business on the fact that you’re properly covered? Well… would you?”

If you haven’t sat down with your Insurance Professional and had detailed discussion of what is covered within your Professional Liability Policy, how your organization can mitigate risk, and what happens when there is claim, then you cannot answer that question yes.

OK Ryan, What Should I Watch For?

Claim Expenses Outside of Limit (CEOL) and First Dollar Defense (FDD)

Policies which include Claim Expense Outside of Limit and First Dollar Defense contain the broadest possible coverage language and avoid the limit of liability being used to pay claim expenses. That sounds pretty important right? It is…

What You Don’t Want

Many Professional Liability policies provide coverage with the claim defense expenses  inside the limit of liability and make the deductible applicable to claim expenses.  If you have one of these policies (Which are very common, make you mistake), your firm will pay the deductible towards claim expenses and the whole limit ($500,000, $1,000,000, whatever) may be used to pay claim expenses which could potentially leave nothing to pay an indemnity payment should a claim come to that point.

This is a HORROR scenario for your organization…

Imagine being sued and loving life as your insurance carrier comes to your defense only to find out that your policy provided Claim Expense Inside the Limit.  So when the judge deals out your indemnity payment its coming straight from your business, Straight Cash! No Insurance Left… Too Bad…

With full CEOL/FDD, the firm pays nothing out of pocket for claim expenses and the deductible will only be paid out if and when an indemnity payment is awarded to a claimant.  This protects the full limit of liability from claim expenses and leaves the full amount available for an indemnity payment.

Which sounds better to you?

Please, Please take this seriously and find out if your Professional Liability policy has Claim Expense Outside of Limit and First Dollar Defense language…

Disclaimer:

This article is for informational purposely only. There is no legal advice being suggested or proffered and the author assumes no responsibility or liability for the actions take or not taken by the readers based upon such information.

Thank you,

Ryan H.

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