Lesson 201 - Professional Liability Insurance

What it covers

If your business faces a lawsuit related to the services you provide, errors and omissions insurance can help cover: Attorney fees, Court costs Administrative costs for gathering documents Settlements and judgments

How it works

An errors and omissions claim can put your entire business at risk. Even if the person suing your business drops their lawsuit, you still may have to pay thousands of dollars in legal expenses. If their claim goes to court, your expenses, settlements and judgments can reach into the millions. Without errors and omissions insurance, these costs may have to come out of your business and personal assets.

Different Forms of Coverage

The key difference Claims Made versus Claims Occurrence Claims

Claims Made the policy in force today when the claim is made responds to a claim. Ex: You have claims made policy, with retroactive date from 2003. You submit a claim today for a patient you treated in 2004, your policy today (Current carrier) would cover the claim.

A claims made policy cover claims as long as they are reported during the policy periods and are triggered by an event that occurred on or after the policy retroactive date.

An Occurrence Made policy in force on the date of the event, when the event occurred, responds to the claim. Ex: You have an occurrence policy for the last ten years. You submit a claim today for a patient treated in 2004. Your policy from 2004 z9carrier in 2004) would cover the claim.

In an occurrence policy, coverage is based on the event that triggers a claim rather by an event when the policy was in force will be covered, regardless of whether the policy is still in force when claim is submitted. The policy covering in 2004 would cover the claim.

Policy Coverage Standards

Requirements of Notice of Claims or Potential Claims

• Incident Sensitive

• Written Demand

First Dollar Defense

• First dollar defense is coverage of some liability policies in which retentions do not apply to defense cost, even if no indemnity payments are made in conjunction with a claim.  If an insurer were to expend $10,00 on defense of a claim and nothing for indemnity, insured would not be required to pay any out of pocket cost for defense.

Defense Costs

• Defense Inside the Limits: Defense costs are deducted first from the policy limit, which cuts into the overall limit of dollars available to pay for monetary damages awarded in ruling.

• Defense Outside the Limits: There are separate limits available for legal defense costs and court awarded damages. So the defense cost outside the limits don’t erode your policy limits available to pay for settlements resulting from a suit