Professional liability

Rough Notes, Oct 1999 by France, Larry

How about some good news?

Do you want to market a product that is in a growth mode? One that is expanding along with the creation of more professional occupations, and one that can lead to large package business? Professional liability is the answer.

As you look through the list of markets at the end of this article, you will be amazed at the number of target markets available. Three areas that stand out are the medical and legal professions, along with our new friends, the Internet and e-commerce. In the medical field it is not necessarily new occupations that create the critical need for professional protection. As more social services, health care and laboratory facilities open, professional liability potential will be on the increase. Xray technicians, radiologists, clinical laboratories, dental hygienists, surgeons, and medical research organizations are just a few of the medical professions that are prospects for professional liability products.

Not all of these are easy to place due to past claims history. Pacific Professional Insurance Services has produced, underwritten, and managed professional liability programs since 1958. Programs include physicians, surgeons, dentists and maxillofacial surgeons. Michael Wahl, vice president of underwriting for Pacific Professional, comments, "The market for nonstandard physicians and surgeons remains highly competitive and the product under-priced. There appears to be some slight hardening in a few states but in most, particularly Texas and Florida, the market remains soft.

Several companies who burned their way into the market have, now that the smoke is clearing, become more cautious and (one hopes) are coming to realize the specialized nature of the product."

With regard to the introduction of new markets and their pricing, Howard I. Stone, president of GrayStone, a managing general underwriter of professional liability for law firms since 1953, says, "Pricing is very much at the bottom now; it has flattened out." Stone doesn't foresee any surprises throughout 1999 or the first six months of 2000. After that, he anticipates some rate increase activity. On the subject of new entries in the marketplace, Stone says, "Some will come and some will go." He points out that Gray-Stone's programs are very sophisticated insuring forms that were specifically designed for law firms. Many of our respondents agreed that specializing in a particular field is one of the keys to providing a quality product.

In the cyberspace liability area, the end is not in sight for existing and newly created occupations that will require the protection that professional liability affords "due to the exposure arising out of the rendering, or failure to render a professional service." Programs exist to cover Web site designers/developers/consultants, Internet service providers, and other related computer technology professionals. Miscellaneous E&O insurance provides for damages because of an error or omission for service provided to third parties. Media liability policies provide coverage for defined named perils and defense costs arising out of online transactions.

Professional liability limits range from $100,000 up to $75 million with higher limits available for isolated and qualified risks. Some markets will provide combined single limits while others will contain a per-claim/occurrence limit and an annual aggregate. These limits will vary by the class of business. E&O, D&O, EPLI and package policies can be obtained from providers of the professional liability markets.

As you are aware, many clients still perceive that since "I have liability coverage" everything is covered. The general liability policy will exclude by endorsement almost all, if not all, professional liability exposures. Those who are held to a higher degree of accountability due to education and experienceprofessionals-must address their liabilities usually by separate or endorsed coverage. All policies contain exclusions. The specific profession will dictate what exclusion applies as opposed to common exclusions found in most policies. Examples would be claims arising out of the insured's dishonest, criminal or malicious acts.

Due to the impact on professional reputations and monetary loss in the medical field, a policy may require a written "consent of the insured" before a settlement can be paid. This may not be found in newly issued policies. Limiting the losses may be addressed by submitting the claim to arbitration and eliminating the insured's consent to pay.

The importance of the field of professional liability was further demonstrated in 1986 when the Professional Liability Underwriting Society (PLUS) was founded to enhance the professionalism of members through education and other activities. More than 3,000 members support this goal. To provide education, PLUS has created the Registered Professional Liability Underwriter (RPLU). This designation requires completion of a five-part course and the completion and passing of exams on each part dealing with the technical aspects of professional liability. A strong commitment for one coverage!