2009 Professional Risk Symposium: EPL, E&O and Fiduciary San Diego, CA ~ April 29 & 30, 2009 Emerging Issues in Miscellaneous Professional Liability

EMERGING ISSUES IN MISCELLANEOUS PROFESSIONAL LIABILITY MODERATOR: Robin W. Chiasson, CPCU, ARM, ASLI, RPLU, Program Underwriter, Allied World Assurance Company, Inc. PANELISTS: Carole Brown, CPCU, ASLI, Vice President, American E&S Thomas Herendeen, MBA, RPLU, Vice President, Specialty Lines Division, Philadelphia Insurance Companies Rocio L. Orta, CPCU, RPLU, ASLI, President and CEO, American Special Risk Insurance Services Stephanie Solomon, JD, Assistant Vice President, CNA

Session Outline Miscellaneous PL “Primer”  MISC PLI Market Overview  Why is coverage necessary? Emerging Trends  Evolution and Growth of Professional Service Providers  MISC PLI Coverage Trends A Few Words about Miscellaneous PL Claims What does the future hold?

MISC Professional Why It’s Unique “Profession” being insured is often not clearly defined – nor are there definitive professional standards “Injury” typically is financial Purchasing Decision often driven by Third Parties Loss exposure directly controlled by the Insured

Miscellaneous PLI by the Numbers $ in Millions; 2007 MarketStance, Inc.

Miscellaneous PLI is a Fragmented Industry Diverse – includes over 50 NAIC Classes Unlike the “Big 3” – Lawyers, A&E, CPAs – (non-medical) market landscape, less than 20% of MISC Professional practitioners or firms maintain E&O coverage Segment expected to grow in the current service driven economy with downsizing leading to more independent contractors

Professional Classes Set for Expansion 2007 MarketStance, Inc.

Why Do Miscellaneous Professionals Need PLI? To protect their clients – impact of their professional error can severely impact or shut down the third party client’s business E&O fill in potential gaps in the CGL coverage Legal environment for many service providers, especially technology, is uncharted and developing = it’s expensive to defend yourself

Boundaries of “Professional Service” are Expanding Green Building Consultants/Certifiers Photographers/ Event Planners Life Coaches Business Managers Background Screeners Field Servicing Process Servers/ “Repo” Professionals

Emerging Trends: Liability of Individual Professionals As individual licensing of professionals increases, more firms are requiring E&O for Individual Practitioners within the firm – in some cases also follows state licensing laws:  Mortgage Brokers  Real Estate Agents  Insurance Agents  Home Inspectors  Mortgage Field Agents

Emerging Coverage Trends GL “Packaged” Approach  Process Servers, other Bi/Pi driven classes Increased Limits of Liability Coverage Dropped after Contract is complete – ignores nature of the coverage, which is typically Claims-Made Challenge to anticipate E&O exposures as Insureds scramble for Work – “What will they do for $ ?”

Coverage Evolution- Broader Coverage Personal Injury Contingent BI/PD – Explicit Broadened Copyright/Trademark and Intellectual Property coverage Worldwide coverage Coverage for Independent Contractors

Coverage Evolution- Broader Coverage (cont’d) Traditional GL Coverages requested  Additional Insured  Waiver of Subrogation Removal/softening of key exclusions  Bankruptcy  Warranty/Guarantee  Breach of Contract

Tech-Driven MISC Professional Coverage Needs Coverage Needs of Tech Insureds:  Tech exposures common to MISC Professional Classes  Tech exposures differ by size / scope of insured services  New policy forms may result in gap in coverage between standard property and D&O coverage

Common MISC Professional Coverage Requests Contract Terms Driving Coverage Requests Patent Infringement Coverage / Defense Higher Limits – Client/Project Driven Resistance to “Step” Rate Increases at Renewal

Common MISC Professional Claims MISC PLI coverage triggered by professional services  Misrepresentation  Breach of Contract  Unfair Business Practices  Tortious Interference with Contract  Unjust Enrichment

The Current Economy Adds Several Wrinkles In a Bad Economy  Increase in frequency of claims  Can an entity afford to defend itself?  Bankruptcy of Insured Dealing with Trustee Inability to collect retention  Bankruptcy of Plaintiff Entity Dealing with Trustee

Claims against Entities Providing Technology Services  Types of claims are similar to other MISC Professional Service Provider Claims Misrepresentation in services provided relative to designing, developing, programming, installing, servicing, supporting computer software, computer hardware, etc.

Claims against Entities Providing Technology Services  Expensive to Defend Nature of work performed E-Discovery Amount of Data Costs of Computer Experts

Coverage Enhancements Can Mitigate the Tech Loss New Blended forms Coverage for first party and third party risks Crisis Notification Protection Pre-Claim Assistance/Risk Management

Looking to the Future MISC Professionals Continue to Expand Economy Outsourcing of technical services Ongoing “soft” market conditions

Features that Count Broad coverage terms; some degree of customization for the market niche Expansion of “Admitted” capacity for many classes Risk Management Tools Bundled Commercial Package/ BOP programs

CHANGE = OPPORTUNITY “In a time of turbulence and change, it is more true than ever that knowledge is power” John Fitzgerald Kennedy

Panel Contact Information Carole Brown, CPCU, ASLI Tom Herendeen, RPLU, AFSB Vice President Vice President, Specialty Lines Division American E&S Philadelphia Insurance Companies Rocio Orta, CPCU, ASLI, RPLU Stephanie Solomon President & CEO Assistant Vice President American Special Risk Insurance Services CNA Global Specialty Lines Robin Chiasson, CPCU, ARM, RPLU Program Underwriter Allied World Assurance Company (US) Inc.