1. Finance 431 Professional Liability

2. Historically only covered liability from Professional Services to others Medical malpractice Doctors Errors and Omissions Accountants Lawyers Engineers and Architects

3. Professional Liability Today, more widely considered for a number of organizations Directors and Officers liability Fiduciary liability Employment practices

4. Professional Liability Loss exposures Occurrence v Claims made Settlement conditions Defense costs Deductibles and self insured retentions Other factors

5. Professional Liability Loss Exposures CGL excludes most professional liability loss exposures Focus is on professional services exposures not on same type of exposures as CGL Not focused on premises or bodily injury or property damage Unique exposures and underwriting considerations Generally written by companies well experienced in the business- a real specialty business

6. Professional Liability Occurrence v Claims Made Coverage Professional Liability frequently written on claims made basis Losses tend to be large Infrequent Often difficult to know if premium is adequate May pay claims years after receipt of premium

7. Professional Liability Claims made coverage What does that mean ?

8. Professional Liability Claims made coverage …covers liability claims that are made or submitted during the policy period for covered events that occur on or after a retroactive date and before the end of the policy period. Helps to know claims for any given year Can provide extensions to time period for the insured

9. Professional Liability Settlement Conditions Underwriters want the right to settle out of court without the consent of the insured May or may not have that right in policy

10. Professional Liability Defense Costs May be paid in addition to policy limit May have significant impact on max loss if separate

11. Professional Liability Deductibles and self insured retentions Large deductibles are common Self insured retentions common $ 10,000 plus Participation in loss provides incentive for prevention

12. Professional Liability Other factors Social and legal trends real factors Corporate scandals Wall Street Accountants Litigation growth Economic issues Industry issues Medical malpractice Merger and acquisition Employment practices liability

13. Professional Liability Directors and officers liability-insurance and indemnification Indemnification D & Os are reimbursed by corporations for Legal costs Settlements Judgments Fines

14. Professional Liability Directors and Officers Liability-legal background Liability to shareholders under state incorporation laws Duty of care Make informed decisions Business Judgment Rule Duty of loyalty Ensure decisions are in the best interests of all shareholders when a conflict exists

15. Professional Liability Directors and officers liability-legal background Liability to shareholders under securities laws ( federal and state) Disclose material information in timely manner Types of suits Derivative – on behalf of corporation Direct actions-on plaintiffs’ behalf Individual Class

16. Professional Liability Directors and officers liability D& O insurance covers Losses not indemnified by corporation Indemnified losses paid by corporation Common exclusions Illegal personal profit Willful misconduct

17. Professional Liability Directors and officers liability Incentives to settle securities class actions Merit of securities class actions

18. Professional Liability Fiduciary liability Employee Retirement Income Security Act of 1974(ERISA) Fiduciary liability to pension plan beneficiaries Individuals responsible for investment, control or disposition of assets held by plan May be held responsible for errors and omissions of outside entities that provide admin and related services

19. Professional Liability Fiduciary liability Fiduciary liability insurance Covers legal liability including defense costs Generally written as stand alone Other related coverages Fidelity and Surety bonds Employee Benefit Liability (EBL) Insurance

20. Professional Liability Employment practices liability Mergers and acquisitions Experiences in dealing with disgruntled employees

21. Professional Liability Personal experiences D & O Board of directors Concerns Exposures Coverage availability Agents E & O Metropolitan v rural areas Accountants E & O Metropolitan v rural Large audit client v smaller business Audit work v tax practice

22. Professional Liability Next class