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Professional Liability Insurance is a generic term that is used to describe Errors & Omissions (E&O) or Malpractice coverage. E&O protects you for losses relating to claims from your clients that have relied on your profession opinion and knowledge. Claims of this nature are specifically excluded under your General Liability insurance coverage.
Key Items to look for in your E&O policy.
| 1. Consent to settle – do you have the ability to say no to protect your reputation; | |
| 2. Are Defense costs included in the limit or outside the limit of coverage; | |
| 3. Does the deductible apply to the defense costs and how do you pay same. |
Most professional policies are written on a claims made (C-M) basis rather than an occurrence basis. The difference between C-M and occurrence is that when a claim is made under an occurrence policy, the policy that is in force at the time of the occurrence is the one that pays. With a claims made policy, the claim must be made and occur during the policy term. The key to a C-M policy is to make sure your ‘retro’ date is always the same date as the very first C-M policy under which you were covered. If this is not the case, you could have a gap in coverage, even if you have continuously carried E&O insurance.
| Example: | Retro date 1-1-03 Policy effective dates 1-1-07 to 1-1-08, Claim occurs 6-5-05, Claim made 4-1-07 – Yes there is coverage, the claim occurred after the retro date and was made during the policy term. |
| Example: | Retro date 1-1-07 Policy effective dates 1-1-07 to 1-1-08, Claim occurs 6-5-05, Claim made 4-1-07 – No coverage the claim occurred prior to Retro Date. |
Please note: J. Michael Low is a former AZ Director of Insurance, and is the founding partner and an attorney with Low & Childers, PC of Phoenix, AZ. He is still practicing full time and has agreed to help Low & Johnson on certain coverage and claims issues relating to insurance. He is not issuing legal opinions or legal advice on behalf of Low & Childers. Mr. Low is a licensed property and casualty producer in the state of Arizona.
Any questions please give me a call or e-mail. Also, we keep the insurance tips newsletter an various topical insurance issued posted on the Low & Johnson web site www.lowjohnson.com.