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Become better informed about professional liability insurance by being prepared to avoid some potential pitfalls contained in today’s professional liability policies and insurance company practices.
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What do I have to do to get a premium indication?
It’s easy. Simply complete the LiabilityPro Smart Indication Form with logic jump functionality or complete the PDF version and email it back to us along with a copy of your expiring insurance Declarations Page to email@example.com. If completing insurance forms is not your favorite thing, we can also work with a copy of your current carrier’s last application and Dec Page. If you have had claims in the last five years, a loss history report or loss run is strongly recommended but some insurers will start with written descriptions of the claim(s) and an estimate of actual/potential damages and defense costs.
What information do you need if there are open claims or closed claims in the last five years?
If there are current or prior claims, most insurers will require a current loss history report from your current insurer and any insurer in the last five years that you reported a claim or disciplinary proceeding to. Old reports for previously closed claims with no change are fine, but if there are any currently open matters, current loss runs are needed. It’s a good idea to request and retain “loss runs” from your insurance carriers annually until all of the claims are closed. If you can confirm that all claims have closed with no loss payment nor defense payment, most insurers will offer an indication or premium estimate pending receipt of the loss history report(s).
What information do you need if I have a currently open or previously closed disciplinary action?
The insurance companies require a copy of the complaint, the response provided by you and the final disposition of the matter by the grievance committee. If your insurer’s loss history report shows that the matter was closed with no action taken, then the background information is generally not needed, but the matter(s) need to be disclosed for the period of history required by the insurer - usually the last five years. Any rulings that resulted in an adverse ruling such as a reprimand, censure, fine, suspension or disbarment will require full details including a copy of the ruling. Any adverse ruling anytime needs to be disclosed and it’s recommended that a narrative be attached to describe any steps taken to prevent a similar situation from occurring in the future.
Do I have a grace period after the quote expires to accept and bind coverage?
First, note that coverage may never be bound (put in place) unless the insurance company has released a firm “quotation” with no subjectivities and the period of time in which to accept terms is still valid. Professional Liability Insurance companies usually do not ‘backdate’ nor do they allow for a grace period to accept terms once your proposed effective date has passed. Any extension of time to accommodate your review and acceptance of the terms offered must be specifically stated in your quotation.
What is required to bind coverage?
1. A firm quotation issued by the insurance company; and
2. A fully completed, currently signed and dated application by the business owner or principal, a copy of your current letterhead, any subjectivities if not previously satisfied; and
3. Your written acceptance of and confirmation of the terms desired signed and dated prior to the expiration of the quote validation period; and
4. Your check made payable to LiabilityPro for the full annual premium and any applicable state taxes or fees; or your check for the down payment and an executed premium finance agreement if financing is desired.
Can I use another insurance company’s application to bind coverage?
Insurance companies will rarely bind coverage without their specific application. While it seems that the questions from one carrier to another seem similar, some may be, but not all. Carriers require their application be completed and signed and dated. The application usually attaches to the policy and becomes a part of it. The carrier is relying on the information stated in the application to issue your policy.
What is “prior acts coverage’ and how do I know if I have it?
Under a claims made policy, the “prior acts date” is the earliest date that the insurance company is willing to cover previous acts on behalf of the policyholder. Usually a specific prior acts date is memorialized in the Declarations Page or by endorsement. If the insurance company does not refer to an actual prior acts date, then coverage for prior acts is usually defined in the policy and is generally the same as the date of organization for the named entity and the date of hire by the entity for any individual insured. Most insurance companies offering this insurance, offer coverage for acts on behalf of the named entity or “named insured”. If an individual professional is joining your company from a solo practice or a dissolved partnership and needs prior acts coverage, your agent needs to be made aware so that the individual coverage may be accommodated by the new insurer if available. If the individual’s previous firm is still in existence, then the former firm will be responsible for acts on its behalf and the new coverage will not cover claims resulting from acts performed prior to joining your company. If the individual’s former firm ceases to exist, the agent should inquire about extended reporting period (“Tail”) coverage under the former firm’s expiring policy.
What do I or the management committee of my firm need to consider before moving our policy to a new insurance carrier or program?
Any replacement coverage should be comparable or exceed the coverage under your current policy both in terms of the amount of coverage (the Limit/Aggregate) and Deductible (the amount payable by the insured) and the prior acts date for all concerned, should not be more restrictive in any manner. The single most important detail in avoiding a potential gap in coverage, however, is to be certain that any potential claims or disciplinary matters are reported to your current insurance company and properly disclosed to the new insurer in your application. Failure to do so will compromise your coverage under the former policy which requires that claims and circumstances be reported before the policy expires and under the new policy for which the intent is not to cover known claims or circumstances. Disciplinary matters should be treated as possible claims and reported timely to your insurer at the time the complaint surfaces. Any claim that evolves later then will be the responsibility of the insurer who was previously notified of the disciplinary action. Failure to disclose known claims or circumstances on the new carrier’s application, can void coverage for that matter or void coverage altogether as in the case of a court ordered rescission of the policy.