For many companies and insurance agencies professional liability is often forgotten about. When placing insurance people tend to only think about Property, GL, Umbrella and Auto; and that’s okay, but helping your insureds to see the value beyond those basics makes you a true risk manager.
Two important coverages that all companies should think about are Director and Officers (D&O) and Employment Practices Liability Insurance (EPLI). These two policies are put in place to respond to negligence that happens within your own organization and which cause financial losses to others.
Not only can Benchmark place your D&O and EPLI but we do it well. Understanding coverage forms and exclusions is key to finding the right fit for your client. Let Benchmark help you with this! Below are some important coverage highlights to consider when purchasing D&O and EPLI.
Deductibles or Retentions
Depending on the size of your company make sure you will be able to afford the deductible you choose. Choosing a higher deductible will lead to a cheaper premium but be careful that the deductible can easily be paid by your client.
Definition of Insured
When placing coverage it is best to find a carrier with the broadest definition of insured. Make sure the definition covers the business entity, organization, the D’s and O’s (Directors and Officers), employees (Full Time/Part Time/Seasonal/Temporary/Leased), committee members and spouses.
Are Defense Costs Inside or Outside the limit? Defense inside the limit means that all defense costs (attorney’s fees, court costs, investigation and filing legal papers) are deducted from the policy limit. This will cut into the overall limit of dollars available to pay for monetary damages awarded by a ruling. With defense outside the limit the cost of defending the case does not erode your policy limits available to pay settlements resulting from a suit. Even though the premium is generally higher it’s best to request defense costs outside the limit, as defense costs can add up to very large numbers quite quickly.
Duty to Defend
This wording obligates the carrier to assume control of the claim defense process, including selecting counsel and paying legal bills. If the policy was non-duty to defense, the carrier would reimburse the insured for funds expended by the insured in defending a claim. The potential pitfall of this reimbursement is that the insured has to carry the cost of defense until the case is settled.
This requires the carrier to obtain consent of the insured prior to settling a claim. If a settlement is recommended and the insured does not agree to settle, the carriers liability is limited to the total of the amount of damages for which the claim could have been settled plus the amount of defense expenses incurred up to the time they made the settlement recommendations.
Choice of Counsel
If the insured would like to choose their own attorney they would need this endorsement added. Some carriers allow their insureds to pick from a list of law firms. The reason the carrier wants to be included in this selection is they work with specific firms that handle specific cases. Another reason is attorney fees. They don’t want their insureds choosing an attorney that charges outrageous fees especially when handling simple claims.
3rd Party Coverage
You want to make sure this is covered. Third party claims usually occur when a person outside the company such as a customer or vendor accuses your employee of wrongdoing.
Wage and Hour
Wage and Hour claims can be financially devastating due to the fines or turning into class action lawsuits. No carrier provides full limit from Wage and Hour but many will provide a sublimit. Be sure to ask about this coverage when placing a policy, as we do have carriers that will write this coverage on a stand alone policy.
Shared or Separate Limits
Some carriers provide shared limits which combine your D&O and EPLI liability. Others provide separate limits. For your smaller clients that don’t need large limits, combining coverages into a single limit offers a premium reduction. Keep in mind in this case your losses both reduce the same aggregate limit. For your larger clients it may be best to offer separate limits due to the liability needed to protect them.
Many carriers offer free legal consultation or HR support on employment issues. It is important to see what additional services that your carrier offers. This can be a great selling point for a smaller client. It can make them feel like the premium they are paying isn’t just going to the protection they are gaining through the policy, but also to access to a service they would otherwise have to pay a lot more money for.
I know this seems like a lot. That is why Benchmark is here. Our expertise creates informed solutions for all clients for professional liability, no matter how large or small. With diverse backgrounds and experience, our staff is ready to serve your agency. We remain committed to your success. We want to earn your business and remain your wholesaler of choice!