Professionals Fall Back on Insurance Safety Net
Insurance is necessary for just about everything these days , the car, health, life, home and business , but professionals sometimes need a little extra.
Professional liability insurance is needed by an array of white-collar worker who include everything from doctors to engineers to architects.
Essentially, a policy covers “negligent acts, errors and omissions in services that they provide or in services that they fail to provide,” said Rob R. Supple, executive vice president of Cavignac & Associates.
The Downtown insurance brokerage has more than 200 clients and mainly insures architects, engineers, lawyers and accountants.
Professionals buy a liability policy to protect their business against a claim and to meet insurance requirements set by their clients, he said.
A liability policy covers claims for third-party bodily injury and property damage and economic damage as a result of professional acts, he said.
Due to the economy, Supple said professionals are buying higher limits of coverage, which in turn can decrease the deductible.
Compared to the early ’90s, insurance coverage is now broader and less expensive, he said.
– Claims Increasing
In Some Industries
Most industries are seeing a rise in the number of claims. Claims against architects and engineers are rising, but not as much as could be expected, Supple said.
“So much is being built now that there is just more work out there; therefore, there is more exposure to a claim,” he said.
While claims are on the rise, Supple said the increase is not exponential, which may be attributed to professionals designing better projects.
Claims against lawyers are also increasing, Supple said.
Attorneys have a higher risk for claims with a more litigious society, compared to 10 or 20 years ago, said Bob Morgan, Barney & Barney’s underwriting manager for professional liability. The San Diego-based company’s professional liability department specializes in policies for physicians, dentists and attorneys.
– Liability Insurance
Suited To Professionals
Morgan said it is more crucial for professionals to have this type of insurance, since they are often held to a higher standard than other lines of work.
If a mechanic doesn’t fix a car properly, the owner can take it back and have it repaired correctly, he said.
If a lawyer makes a mistake while planning an estate, it could financially hurt people who would want to recoup any losses incurred as a result of that mistake, Morgan said.
Some professionals, like those working in the construction industry, may be able to reduce their risk by keeping an eye on client and project selections, Supple said.
Companies or individuals should seek reputable and well-financed clients, avoid high-risk projects, make sure a contract is good and insurable, and seek projects within the scope of abilities, he said.
It is also important for professionals to be aware of what the policy covers, Morgan said.
– Two Types Of
Professional liability differs from general liability insurance, and most professionals have both, he said. The latter covers situations that occur on the premises rather than professional acts, he said.
Reading and understanding the policy is also important, Morgan said.
“One of the problems with professional liability insurance, and with all kinds of insurance, is policyholders don’t read their policies,” he said. “That’s the first thing any insured, particularly a professional liability insured, should do.”
Although policies are tailored to each profession, each one will include the persons covered, exclusions, length of coverage, definitions, responsibilities and other information, he said.
Businesses should find out what they have to do if an employee leaves or is hired, Morgan said. Depending on the policy, employee turnover may not have to be reported to the insurance agency, he said.
– Claims-Made Vs.
Having a claims-made or occurrence policy can also make a big difference in the type of coverage a professional receives, Morgan said.
Professional liability policies are usually written on a claims-made basis, while other types of insurance are occurrence-based, Supple said.
A professional should be aware of the difference. An occurrence-based policy covers any claim for an incident that occurred during the coverage period, he said.
“Anything that happened during that policy was always covered by that policy forever,” Morgan said.
– Claims-Made Policies
Are The Most Common
Most professional liability policies are now written in a claims-made basis, which only covers claims that occurred and were filed during the policy, he said.
By changing policies, a professional could lose coverage for incidents that occurred during an old policy but were claimed after moving onto a new insurer, Morgan said.
“You need continuity of coverage,” he said.
A policyholder can buy “tail coverage,” which extends the reporting period on a policy that’s ending, or retroactive coverage on a new policy, which covers claims for situations that occurred during the old policy, he said.
Morgan said it is usually better to buy retroactive coverage from new carriers.
Some decide tail or retroactive coverage is not necessary, he said.
“Some of them make it, some of them don’t,” Morgan said, explaining that professionals are responsible for claims , some can be made years after an incident occurs , not covered by a policy.
Individuals who are thinking about retiring or getting out of their profession should also make sure they have coverage, since claims can be made at any time, he said.
Some carriers will offer professionals “a free extended reporting period policy or endorsement to the policy” when their policy ends if the individual has been with a carrier for a certain number of years, he said.
Insurers Report Decline In Capital Gains
The nation’s life and health insurers suffered a 50 percent, or $1.8 billion, decline in realized capital gains in the first nine months of 1999, according to a study by Weiss Ratings, Inc., an independent provider of insurance company ratings and analyses.
One California-based insurer, California State Automobile Association Inter-Insurance, received an A+ Weiss financial safety rating, while six received a rating of D+ or lower, according to the report.