Professional Liability--Things misunderstood!- Part #1

        I wrote an article for IIAA’s Virtual University and I noticed some items being discussed from it recently so I decided this was a good topic to put on the BLOG. We will talk about some key points in the next two BLOGs.

  If you want to win a quick bet ask some colleagues this question—“Is Professional Liability covered under a CGL policy”? I have used this in class for years and 90+% of folks (assuming they have not heard this before) will say “of course not---what a simple question.”  Well---they might not say the second part but 90+% say “no way”.  Well----where is it excluded? The golden rule in Liability coverage is that everything is covered unless it is excluded. Is Professional Liability excluded? NO! It never has been. 

  HOWEVER, before one looks at exclusions you must look at the Insuring Agreement (always the best place to start with any policy), as you must meet the requirements of the Insuring Agreement prior to looking at exclusions. I break Professional into 2 major classifications—

    *Malpractice---bi—touching of the body

      *Errors & Omissions—the “mistake” loss—no bi/pd but a financial loss due to making a mistake---an error.

     If you look at the Insuring Agreement of a GL policy (Coverage A) you will see that it only covers “bodily injury” and “property damage” caused by an “occurrence”. GL policies are “snap, crackle, pop” forms and are only intended (Coverage A) to cover physical happenings that lead to a bi or pd; they do not cover “mistakes” that cause financial loss unless there is a bi or pd. While an accountant might have coverage under his/her CGL if s/he drops a stapler on a client’s foot s/he would not coverage if a zero or two was dropped on an Income Statement. So, while a CGL might not have a professional exclusion it would not cover the “mistake” exposure that many clients have via the Insuring Agreement. A good way to see this---If the NI on a CGL is a corporation Directors and Officers are “automatic” insureds also. I had a student ask once---“….if a CGL does not exclude professional and if D&Os are insureds whey write D&O insurance….?” From the above discussion this should be clear. While D&O might have a “bi/pd” exposure they have a much bigger exposure from bad decisions and management mistakes that cause financial loss to others. Hence, the D&O policy will cover these losses and hence the need for this coverage. 50 years ago most corporations did not have this coverage. Today, not only do profit making firms have it but non-profit entities as well.

    Some of you are probably saying----a physician or a hospital’s biggest exposure is “bodily injury”---is this covered by the CGL?”  The answer is yes, unless the policy is endorsed.  Can we exclude the professional exposure? YOU BET!

   So, the CGL gives you 2 big obstacles---the Insuring Agreement and the exclusion endorsements attached.  Will a CGL for a hospital have a professional exclusion attached?  ABSOLUTELY. MANY risks will have such exclusion endorsements. In fact, if you check your agency’s CGL you will probably find such an endorsement.

  The endorsement often used is the CG2116. The professional exposure being excluded here is designated. You may recall from the BLOG about “the numbers” 21s & 22s are always exclusion endorsements in GL. MANY of the 22s specifically relate to professional and are related to specific professions.

    Here is the other big mistake with professional & GL. Many folks assume that these exclusions are just excluding the “E&O” exposure. NO! The Insuring Agreement does that. Look at the 21 16 or any GL professional exclusion and you will see that it is excluding bi/pd/pi/ai-----in other words what the CGL covers to begin with. So, the next big question—where do we cover this excluded “bi/pd/pi/ai”---We will discuss this in Part #1.