When it comes to Professional Services Liability – the devil is in the details
When purchasing insurance for exposure to professional liability, the expectation of the buyer is that risk will be transferred from the firm to the insurer in exchange for the premium paid. However, insurers do not necessarily accept all risks, so it’s important to read the policy closely to be sure you understand the nuances of cover and are aware of any exclusions. One of the first places to look for exception to coverage is within the exclusion section. Exclusions are a common place for insurance companies to carve out coverage for very specific uninsurable losses.
Be aware of the exclusions listed in professional liability policies, as they are often the reason that a claim is denied. The following are a few examples of common exclusions:
- Prior knowledge: The insurance company will not cover claims that a member of the insured firm had knowledge of before the effective date of the policy.
- Prior to the retroactive date: The insurance company will not cover claims that arise out of professional services performed prior to the retroactive date of the policy.
- Delayed claim reporting: The insurance company will only cover claims that are reported within a reasonable period of time.
Keep in mind that many insurers exclude situations and acts by defining terms to be used in the policy. Therefore, be sure to check the definition section as well. I encourage you to review our latest white paper for examples illustrating exclusionary language by definition.
In many instances policy language may be amended via endorsement. Exclusions may be deleted in their entirety or amended to be less onerous in your favor. Your ability to make changes to the policies is subject to underwriting appetite, risk profile of your particular firm and loss experience.
William Gallagher Associates is a leading provider of insurance brokerage, risk management and employee benefits services to firms with complex risks and dynamic needs, within industries that include technology, life sciences, financial risks, health care, renewable energy & clean technology, and environmental services. WGA has offices in Boston, MA; New York, NY; Hartford, CT; Princeton, NJ; Columbia, MD; and Atlanta, GA.