Filling The Gaps In General Liability Insurance
Whether you’re a working professional or someone running a large company, you’re probably aware of the fact that it’s only a matter of time until you’ll be hit with a lawsuit. Erroneous or negligent acts, but also an unlucky round of venture capital and a change in the stock market can get you in a lot of trouble. While most legal hassles are covered by commercial general liability insurance (CGLI), omissions and errors aren’t covered. If you want to be covered, you need to get a special type of policy. In the paragraphs below we’re going to tell you more about the various types of insurance policies you should consider for all your professional coverage requirements.
Errors and Omissions Liability Insurance
What it covers: This policy covers you in the event someone files a lawsuit against you in the event you don’t perform your professional duties or if you render negligent professional services.
Who Needs It: IT companies, engineers, architects and basically any individual or company that provides paid services to clients.
Coverage: When it comes to the coverage, it includes settlement, but also judgment and legal expenses up to the policy’s limit. In general, coverage is provided based on the risk of the insured company or individual. In terms of amount, coverage starts at one million dollars and has a deductible of one thousand dollars to twenty five thousand dollars per claim.
Exclusions: Exclusions include claims that arise from dishonest acts, fraudulent acts and criminal acts, but also punitive damages, employment related claims, property damage or bodily injury.
It’s important to keep in mind that these policies are offered on a claims made basis, so in order for a claim to be accepted, it needs to be filed within the policy’s acceptable period. Errors and Omissions policies on the other hand have a retroactive date which means that claims made in regards to acts committed before this date are not going to be covered by the insurance company. While commanding a higher premium, retroactive coverage is available.
The majority of claims made policies make it easy for people to purchase tail coverage. This is an extended reporting period which is going to cover claims filed after you choose to discontinue your coverage. The reason you should consider tail coverage is because it’s the best way of protecting yourself against claims made when you were professionally active, yet the claims were reported after you quit practicing or retired. If you cancel an Errors and Omissions policy and you fail to buy the extended reporting period coverage, then you aren’t covered anymore in such events.
Having this type of insurance policy you’re going to be protected against claims and your insurance company is going to pay for the costs of defending you. In most situations, based on the terms of your policy, the insurance company may even need to defend the whole claim, regardless if someone filed non-covered allegations against you. On the other hand, the insurance company isn’t obligated to indemnify you for a judgment, verdict or settlement based upon allegations that aren’t covered.
Directors and Officers Liability Insurance
What it covers: With this policy both officers and directors of large organizations are protected against legal judgments and the costs that arise from gross errors and negligence, conflicts of interests, firing and hiring decisions, but also releasing confidential data, failing to maintain property, erroneous investment decisions and unlawful acts.
Who needs it: Company officers and directors who are accountable to clients, employees, creditors, but also shareholders and investors.
Coverage: There are 3 types of coverage, including A, B, C. The policy has a minimum liability limit of one million dollars and even five million dollars. The money can be used for settlement expenses, judgments, damages and expenses of a claim. The one million dollars limit is per policy and cannot be shared among separate policies.
Exclusions: The majority of Directors and Officers policies do not cover criminal acts, such as fraud and more. On the other hand, the segregate cause does make it possible for companies to be covered in the event they and other parties are hit with a lawsuit because of the criminal actions of a company director. Other exclusions are property damage, bodily injury, punitive damages, but also claims that arise out of prior acts. Depending on the state the policy was issued in, there is a chance that punitive damages may be covered.
Coverage A: This is actually an employee/personal coverage which effectively covers future, present and past officers and directors against any claims that allege they committed a wrongful act. The policy also covers the liabilities resulting from their acts.
Coverage B: This type of coverage makes it possible to indemnify the company officer and directors for any claims files against them. The company though cannot be covered for its own liability.
Coverage C: This policy insures the organization against securities claims. Lawsuits that target officers, directors and other parties are quite common, but this policy protects the company for its own liabilities. When it comes to security claims, entity coverage makes allocation unnecessary. On top of that, Directors and Officers policies can be made up of complex allocation clauses that may obligate parties to reach an allocation agreement they’re comfortable with. If this isn’t possible, then the policy may obligate the parties to accept arbitration or the policy itself may provide it.
Other Things To Keep In Mind
Loss experience, industry type, but also mergers and acquisitions, location and the form and size of the organization directly impact the premium rates in a standard Directors and Officers policy. It’s vital to keep in mind that the insurance company isn’t obligated to defend the officers and the directors.
A wide range of insurance companies allow deductibles, but only if the company can indemnify those named in the legal suit. Buyers of Directors and Officers policies need to know that in order to be protected, they have to make the claims and report them while the policy is still active.
In some cases, based on the insurance company considered, some may even include Employment Practices Liability coverage in the Directors and Officers policy. In terms of coverage, it may not be as great as that of a separate policy.
Even so, there are many kinds of companies that benefit from protection under safe harbor statuses. For instance, in some states, directors of nonprofit companies may be protected under certain provisions from losses. This doesn’t mean though that getting insurance is not required anymore. The provisions cannot protect individuals if someone files a lawsuit against them, but it can protect them from a final adjudication.