Your professional liability claim history is the number one testament to your professional credibility and key to maintaining affordable professional liability insurance. If you have had claims or disciplinary actions made against you in the last five years, any new Insurer you apply to for coverage is going to require a loss run from the insurance company that you reported the matter to. It is important to know the accuracy of what is being reported in the loss run(s) as it is relied on most heavily in any decision to offer or decline future applications for insurance.
You or your insurance broker need to review the information presented and clarify any inaccuracies or concerns with the insurance company requesting their reply to you in writing. Keep in mind, having a skilled professional liability insurance broker as a resource for you can take away stress by understanding loss runs and communicating effectively with the insurance company.
Terminology varies by Insurer and can be confusing
Professional liability policy forms are not standardized and vary by insurance company. Loss run formats do as well, especially in cases where the insurer processes the PL claims on a system designed for general liability or property/casualty claims. Salvage, subrogation and retention but can be used interchangeably with terms more common in professional liability insurance such as recovery and deductible.
Commonly used terms in professional liability insurance claims
Understanding PL loss run terminology will make it easier to decipher the report:
There are three: an incident, a claim and a disciplinary grievance
It can be open, closed or re-opened;
This is a third party bringing the allegations of wrong doing against you;
Date Claim Made
In a Claims made and reported insurance policy (which is the norm now for PL insurance) refers to the date that the claim is reported to the insurance company, and not necessarily the date when the policyholder first became aware of the claim. The policy requires the timely reporting of claims and even potential claims during the policy period in which the insured first becomes aware of the incident or claim. If the claim or potential claim is not reported timely, the result could be an uncovered claim. This date is also used to determine the age of the claim which plays into the five year reporting period for an insurance application. The age of the claim also affects any surcharge that may apply to your policy premium.
Policy Inception Date
This is the starting date of your policy at 12:01 AM as listed on the policy's declaration page.
This is the estimated or potential value of a claim set aside by the insurance company should a payment be necessary to satisfy a judgment or settlement. Although just an estimate, this is the insurance company’s evaluation of what is expected to be paid out on the claim after evaluation of the facts by defense counsel and the insurance company’s claim staff.
This is the insurance company's estimated or potential amount of the costs and expenses expected to be spent in hiring legal counsel to investigate, respond to and resolve (close) the claim. Costs are included here as well such as court costs, document filing and expert witness fees.
This is the dollar amount incurred by the insured before the policy pays out either in loss payment or defense costs. Deductible can also be referred to as a retention in that it is borne by the insured and is not insurable. The insured generally pays the deductible directly to defense counsel and it is generally not tracked (reported) on the loss run. The policyholder should keep a record of all deductible payments.
It is also referred to as an indemnity payment and is the amount actually paid by the insurance company for a judgment or settlement. This amount reduces the Loss Reserve.
This is the amount paid by the insurance company for the legal defense and other necessary expenses such as court costs. Monies paid reduce the amount reserved for expenses.
This is a brief description of the act, error or omission that led to the claim and/or a summary of the allegations made.
- You can research and interpret a loss run on your own or directly with the insurance company; however, an experienced professional liability insurance broker will help you do this effectively and without hassle.
Loss run report formats and terminology tend to vary between insurers and it is upon you and your broker to annually request and retain, and if necessary, question the information presented for all open claims until fully closed. Your loss history will influence if your current insurer or a new insurer will insure you in the future.
Professional liability claims and potential claims need to be reported during the policy period in which the claim or the possibility of a claim first becomes known to the insured. Not reporting such matters before your policy renews, may compromise coverage.
When applying for insurance, explain the facts of the claim and either defend your actions or say what steps you have taken to prevent a similar situation from reoccurring. Not doing so can negatively affect your insurability and premium.
- Lastly, retain a current loss run annually from your current insurance company or any former insurance company until all reported claims are closed.