When you purchase professional liability insurance, most of the time, you’ll see what’s known as a retroactive date listed somewhere on your declarations page of the policy. This retro date actually refers to the date that the coverage will go back to, to cover you for your professional services.
If you are an older professional, like me who has been around for the last 30 years, you might have a retro date of 1/1/1989. Or if you’re a new professional, like my daughter, you might have a retro date of 1/1/2015.
Again, just remember, it’s the date that the policy will refer to or go back to cover you for the professional services you perform for your clients.
What is the difference between professional liability insurance and general liability insurance?
The best way to answer that question is really just to give you a couple of examples. A professional liability policy covers the professional for the work that he or she does on behalf of their clients. So a lawyer’s professional liability policy would cover a lawyer for those professional services that they are doing or performing for their clients.
A general liability policy is what we like to call “slip and fall insurance”. If somebody were to walk into your office and slip and fall where they may get hurt a little bit, they could turn around and sue you for bad back medical claims or their hospital visit, etc. This is where your general liability policy would come into play.
As general liability and professional liability kind of sound the same, they are two very different types of coverage.
The easy and obvious answer to this question is so the professional protects himself or herself against claims of malpractice. A more insightful or thoughtful answer is, you buy professional liability insurance not only to protect yourself, but also to protect your client.
In the event that you do make a mistake or you do make an error, you want your client to be able to be made whole again, because of your error. So don’t just buy professional liability insurance to protect yourself, buy it to protect yourself and your client.
If you have any questions regarding professional liability insurance, contact us at INtegrity First Corporation.
Many lawyers have some type of ownership/equity interest in or with the clients they serve. Others serve on local nonprofit boards within their community. All do so usually without completely understanding how these outside interests and relationships affect their professional liability insurance coverage.
Most lawyers professional liability policies exclude coverage for those professional services that lawyers provide to clients where the lawyer has an ownership interest in or with that client. Some policies go so far as to include ownership interests of the lawyer’s spouse! Common examples that I have seen on lawyer applications are: ownership in title agencies, real estate, and small businesses of all kinds.
LPL Polices also exclude the acts of the lawyer when acting as a director, officer or board member of entities, including nonprofits. Lawyers are often asked to sit on boards because they ARE Lawyers and are tapped for their knowledge of the law during board meetings. It is very difficult for the lawyer and the board to distinguish when the lawyer is acting as a board member and when and if the lawyer is acting in the capacity of a lawyer and lawyer client relationship. It is easy for the lawyer to get caught in a situation where the board believes he/she provided legal advice however the lawyer believes that he/she provided that advice as a member of the board. In the event that “advice” leads to a bad outcome for the board and eventually ends in a malpractice claim, the lawyer could be without coverage!
Before accepting board positions or investing with or in clients, all lawyers should ask how this relationship will impact the professional liability insurance from both a coverage and cost standpoint.
Don’t give informal legal advice to friends or family.
Don’t give informal legal advice to friends or family. It can be tempting at a party or family event, but it could be harmful to both yourself and the receiver of the advice. Your advice, given casually, may be less well thought-out than usual, or not backed by needed research. Also, you could be creating a conflicts issue for yourself by giving advice to a person who has not been through a conflicts of interest check first.
Unfair or not, lawyers have to be more careful than the average person when posting online. Don’t be casual. Don’t post anything about a specific legal matter or client. Include disclaimers. Remember that the Model Rules of Professional Conduct apply to your actions online.
Avoid fee disputes by explaining the fee arrangement in great detail during the first meeting. Confirm this understanding in writing and have the client agree by signing the agreement. When billing the client, ensure there is enough detail in the bill to allow the client to understand everything you are doing on their behalf. Use simple terminology and avoid abbreviations to make sure the bill is easily understood.
Most professionals know to protect themselves and their clients with the purchase of a professional liability insurance policy, commonly referred to as an E&O policy. What most professionals don’t know or don’t care to know, is when and how to properly report a claim or potential claim to their insurance carrier.
Initially, the most important issue when reporting a claim is the timing of the notice to the carrier. All carriers have different reporting requirements but most state that the claim or potential claim must be reported to the carrier in the policy period YOU first become aware of the claim or potential claim. Some carriers are even more restrictive and will use the term “immediately report” or “as soon as possible after first becoming aware of the claim.” No matter the wording in the policy, the timing of the notice to the carrier is absolutely vital to the claim being covered under the policy. A delay in reporting the claim or potential claim to the carrier can lead to a declination of coverage due to “late reporting.” Late reporting is a term no insured wants to hear in a claim situation. Do not fall into the trap of thinking it will just go away, or hold off on reporting for fear that your premium will increase. Providing professional services for others unfortunately will give rise to a claim or potential claim. These must be dealt with immediately.
All carriers have slightly different policy wording with regard to the timing of claim reporting. The best way to reduce the possibility of a declination due to late reporting is to report the claim as soon as you first become aware of the claim or potential claim. Regardless of “how much time” the policy provides, immediate reporting of the issue to the carrier will be viewed as favorable by the carrier and the claims personnel. It may even provide a good night sleep for you!
As an insurance professional for more than 25 years, It never ceases to amaze me how commoditized the professional liability insurance marketplace has become. The coverage is not that simple but yet many professionals purchase the policy on line directly from the carrier without the assistance of a broker. No consideration is given to policy form, prior acts coverage, limits, deductible or the many ancillary coverages available. No value is given to the broker services. I don’t understand this as brokers provide valuable services: policy comparisons, concise explanations, proposal/carrier options and risk management services.
As an insurance agent and the owner of a small business, I understand and can relate to cost cutting measures and getting the best “deal” possible. I have seen clients change carriers/programs/brokers for a $50 savings of annual premium and little or no regard to the coverage or broker services lost! Does that make sense to you?
I don’t believe that the purchase of insurance, especially one that protects a professional’s reputation can be all about the money. Don’t get me wrong, the money issue is very important however neglecting the coverage issue and broker services can be devastating at claim time.