When is a Specialized Insurance Broker a Good Idea?

Jan. 7, 2020

The answer is: Always. You always want to know with confidence that your professional liability insurance claim will be covered.

Suppose you selected the cheapest premium for your E & O Insurance. Likely this decision happened without careful consideration of the coverage you could be missing. And likely you didn't expect a disgruntled client to sue you after a negative outcome. You are diligent and your work is thorough.

Nevertheless, occasionally there is that client who turns up angry and sends you unfriendly emails claiming he needed a better lawyer. But the emails stop, time passes, and you assume your angry client cooled off. Meanwhile, your low-premium professional liability insurance renews for another year. But what happens when six months later you are served with notice of a lawsuit. That angry client had not cooled off, but instead built a case against you.

This time you take the client seriously, and you notify your insurance company of the claim.

After a few weeks, you receive a declination of coverage letter from the insurance company stating that they are denying coverage for the claim because the circumstance that led to the claim was not reported timely under last year’s policy. They took the position that you knew the client was disgruntled because you were not successful in representing him. The insurance company states that your client clearly made his displeasure known to you last year, yet you did not report the matter then as required under the policy. Now what?

You paid your premium, you timely renewed your coverage without any lapse, but you now need to hire your own attorney to represent you in the lawsuit.

You thought that all professional liability insurance policies were the same. You believed the sales representative when he said he was able to offer better (cheap) premiums because the insurance company is a Mutual Insurer and a direct writer meaning they don’t use insurance agents or brokers to sell and service their policies so they can pass that savings in brokerage commissions on to you the policy holder. Unfortunately, you only skimmed over the policy. You had no idea that the company requires any circumstance that could possibly result in a claim be reported during the policy period when first discovered even though no formal claim was made nor would one ever be successful. The sales rep for the insurance company never pointed out that policy condition to you!

Sometimes, you get what you pay for. Had you worked with a broker before buying your policy, things may have been different. A broker owes a duty to keep your interests first and foremost. Other than the contractual promise that he/she has to collect and pay your insurance premium to the insurance company, the broker has a primary duty to work with you to find coverage to fit your needs. That means the broker is obligated to be familiar with the policies he/she sells and to be sure that the customer is aware of restrictive policy provisions. Any experienced professional liability insurance broker knows that insurance companies differ on claim and circumstance reporting requirements and that the customer needs to know that coverage for a claim could be denied, even if renewing year after year with the same insurer, if the Insured had prior knowledge of the circumstance and did not report it to the insurer when first known.

Here are some points to consider before your professional liability insurance policy renews this year:

• Brokers are obligated to put your interests above their own regardless of how much business they write with the insurer or how much commission they will earn for the placement.
• Brokers strive to understand their clients’ needs and make impartial recommendations for them based on their unique situation. Unlike agents, or carriers that offer their products directly to consumers, brokers have a legal and ethical duty to act in the customer’s best interests, rather than the insurance companies’.
• Brokers shop your coverage to multiple insurers after vetting that insurer’s expertise in writing the insurance and claims handling reputation. Brokers often have trusted relationships with the insurance companies they represent.
• Brokers often leverage their close relationships with insurers to negotiate better premiums or specific coverage for you.
• Brokers save you time and frustration in dealing with the often complex underwriting process at no cost to you.

Read more on this topic: https://www.natlawreview.com/article/negotiating-your-law-firm-s- malpractice-insurance-how-to-avoid-purchasing-never-pay-policy © 2019 Arnall Golden Gregory, LLP and McGriff, Seibels, & Williams, Inc.

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Author

Cindy Wiedman, founded Wiedman Insurance Services, LLC (LiabilityPro Insurance Advisors*) August 1, 2014. Cindy is a Registered Professional Liability Underwriter (RPLU) and has designed and administered professional liability insurance programs over a 35-year career working for various insurance administrators in the Midwest such as Shand Morahan & Company, Kirke Van Orsdel, Marsh and Lockton Affinity.

*Serving non-medical professionals in Iowa, Nebraska, Minnesota, Kansas and Illinois