Burning questions about the professional liability and environmental segments, answered by four industry insiders.
Q. How do you best serve professional insureds and agents during the claims process?
Emmanuel E. Manuelidis, Esq., claims and litigation director, Atain Insurance Companies, responds:
We offer excellent client service combined with a streamlined and personalized claims service. We work as partners with retail brokers, agents and insureds because we have a shared entrepreneurial risk. As a result, it is mandatory that we help agents assist their insureds in growing their businesses and minimizing their risk exposures.
Our partnership does not stop after the policy is issued. Savvy brokers and agents continually work with their insureds after policies are issued. At Atain, we want to be part of our insureds’ risk management team. We encourage agents to partner with us when advising clients whose businesses are growing.
Although we cannot answer prospective claim questions, we can provide guidance and peace of mind for an insured who is expanding his or her business. An insured may wish to expand his/her location or services, and want basic answers to questions from us. In almost all cases, we can address these issues expeditiously with our underwriting partners and provide quick feedback to the broker or agent and insured.
To foster our partnership, we also hold periodic claims calls with the retail broker or agent and insured. This provides the insured a concise analysis of his/her risk management successes and alerts them to how problem areas can be alleviated in the future.
In light of our shared entrepreneurial risk with professional insureds, it is critical that we get to know their business. For example, if we insure a debt collection business, we can ask questions to verify that there is basic training and compliance with the Fair Debt Collection Practices Act (FDCPA). If necessary, we can provide guidance to the insured to help it minimize FDCPA violations. From a business standpoint, this benefits the insured in a manner that goes well beyond claims on its loss runs.
Q. How does Atain handle professional liability claims?
Manuelidis: Outstanding client service is mandatory whether handling professional, CGL or property claims.
For our professional insureds, we achieve this through a streamlined claims process and by providing prompt practical information so the insured can profit in his or her business. Our philosophy is that when we do this, the insured will thank the retail broker or agent with repeat business.
Nobody really wants a claim. Clients expect retail brokers and agents to respond immediately, and brokers and agents are therefore under a lot of pressure in this situation. At Atain we pride ourselves on being active listeners. As a team member with agents, we strive to offer insureds first-class, and courteous service throughout the claims process. We also assist retail brokers and agents with offering their clients reasonable expectations of the claim’s solutions to make the process smooth. We strive to settle claims quickly to minimize any loss of income for the insured.
For larger national professional accounts, we have set up individual distinct e-mail addresses, allowing larger insureds to report notices of claims directly to an Atain claims team member and receive immediate acknowledgment. This is another valuable experience agents can offer their insureds when partnering with Atain.
Q. Real estate agents and brokers are always looking at the bottom line when it comes to insurance costs, and as a result they often ask their insurance agent to change carriers. What are the pitfalls of moving coverage from carrier to carrier?
Rochelle Elliott, RPLU, professional lines manager and Center of Excellence in Real Estate, responds:
There are several key considerations for insurance brokers and agents who service real estate firms when making a choice on E&O coverage. All real estate E&O policies are not fashioned in the same way. Coverages and definitions vary. Those variables include:
- Claims made policy form — A common misconception about E&O insurance is that the policy in force when a transaction occurs will provide coverage for a lawsuit that is filed. In fact, E&O policies are written on a claims-made basis and do not respond in this manner. The E&O policy that is in force when the claim is made or reported to the carrier would respond. In addition, for coverage to apply, the alleged incident must also have occurred after the prior act’s date or the retroactive date as listed on the policy.
Switching carriers each year at renewal can potentially jeopardize coverage, even if the new carrier maintains the prior acts cover or retroactive date. Some policies will contain an exclusionary endorsement for unreported potential incidents. Or, during discovery related to a reported claim, it may become evident that an insured was aware of the incident and did not disclose it on the application. Since the application becomes part of the policy, many applications for coverage contain warranties that the insured must attest to, confirming he or she has no knowledge of any potential incidents. This can also be problematic should a claim arise after policy inception and the insured has changed carriers.
Moving from one carrier to another opens the door to potential denial of coverage. Continuous coverage with one carrier will often eliminate this risk.
- Definition of professional services — E&O policies define the scope of services that will be covered under the policy. Ideally, the definition of professional services for a real estate firm should include all duties the firm is obligated to perform. Switching carriers can potentially eliminate coverage if the definitions within the policy are different.
- Coverage features — Insurance agents need to conduct an in-depth review when comparing policies. Is the expiring policy offering added coverages such as fair housing, environmental, contingent bodily injury/property damage, agent owned property coverage, defense outside the limits, franchise coverage, etc.? If these are critical coverage components to the real estate firm, they need to clearly understand what is being offered by the new carrier versus what the current policy provides. Are coverages potentially being eliminated by moving from one carrier to another.
Keeping continuous uninterrupted coverage is vital in protecting all transactions. Loss of a prior acts date or moving to a policy with different coverage conditions could create coverage gaps and even put the insurance broker’s E&O policy at risk.
An insurance broker or agent should present his client with all quotes obtained. Should a real estate E&O claim be denied and it is discovered that the retail broker or agent had a quote from a carrier that would have provided adequate or equal protection and did not present the quote to the client, the insurance broker or agent could be open to a claim from his or her client.
Q. Why should a broker or agent choose to partner with a medical specialty wholesaler?
Nicole Greene, senior broker, professional liability, Burns & Wilcox, responds:
Retail brokers and agents who partner with a specialty broker gain access to an exclusive resource that provides them with unparalleled expertise, strong market relationships and broad market access — assets that are vital to obtaining quick and comprehensive coverage. A medical wholesaler’s true value-added stems from his or her ability to provide in-depth coverage comparisons, formulate unique manuscript endorsements, answer product-specific questions and match products to the client’s corresponding exposures. 28 Agents Market Source , Fall/Winter 2013–2014 Asktheexperts
Q. Why is professional liability a must-have coverage for medically related risks?
Greene: It is a common misconception that only medical professionals such as doctors and nurses need professional liability coverage. Not true! The reality is that any person or business providing a professional service for a fee is at risk. Medical liability is financial protection intended to safeguard a business from an alleged negligent act, error or omission that resulted from its employees’ professional services. One claim for a business without professional liability could result in costly litigation that could force it out of business. When selecting a professional liability policy, agents should:
- Review the definition of insured – Some policies only cover principals and employees, while others include coverage for principals, employees, as well as independent contractors, seasonal, leased, temporary, volunteers and students. A great example of a medical class where this is extremely relevant would also be one of the fastest-growing classes today — medical staffing/home health.
- Review how the insurance carrier defines the covered professional services – Be sure the class code selected broadly defines your insured’s services. However, be careful not to restrict coverage by being too specific in defining the services.
- Request that the coverage form be incident-sensitive – Incident-sensitive reporting is a claims-made policy feature that allows an insured to report potential claims (a specific incident that the insured has reason to believe may give rise to a claim) to the insurance carrier. Early reporting of incidents may reduce the likelihood of a claim ever being made and ensures that coverage would respond even after the policy period expires should the incident develop into a claim.
- Seek coverage from a carrier that offers coverage enhancements tailored to match its services – Common coverage enhancements include: hired non-owned auto; abuse and molestation; loading and unloading; and medical director administrative duties. General liability policies specifically exclude professional services, so a professional liability policy typically is needed.
Q. What should brokers and agents know about environmental risk?
Gina Jones, director of environmental programs, Burns & Wilcox (GAJones@burns-wilcox.com), responds:
Nearly every client has an environmental risk and most insureds are unaware their environmental exposures may have no coverage. For example, a drilling contractor does not seem to present an environmental risk until it hits an underground sewer pipeline, causing raw sewage to release into the soil. Now several tons of impacted soil must be excavated while nearby businesses are forced to shut down for days when their basements fill with sewage. Claims for business interruption for the nearby businesses will be filed along with associated cleanup costs.
Insureds who own, lease or operate facilities also face a wide variety of environmental exposure and potential for risk. Common examples include a building owner who has an undetected water leak that results in mold or a warehouse fire spewing toxins and gases into the environment. An environmental impairment liability policy is specifically designed to address situations such as these. As environmental regulations gain global reach, they are also becoming more restrictive, with larger penalties for non-compliance. Environmental policies today are designed to address the changing regulatory landscape. As such, more companies are seeking the protection of environmental products.
Q. How can brokers and agents help clients better understand their environmental coverage needs?
Jones: Environmental coverage is oftentimes not an easy sell. Many clients say they don’t have an environmental exposure and are not required to carry environmental insurance. They say they don’t need environmental coverage because they never have had a loss. They do not see the importance of environmental insurance until they have had a claim that is declined under their commercial general liability or property policy. In addition, most commercial general liability policies have an absolute pollution exclusion and will not provide defense in the event of an environmental claim. The effects of an environmental pollution loss can be devastating and far-reaching enough to change a client’s business forever. It’s up to the retail broker/agent to help a client understand what’s at stake.
Q. Is all pollution insurance the same?
Jones: The short answer is no. There are many types of insurance products and selection varies according to the client’s particular operations or services. The marketplace has become very competitive, with more than 15 carriers entering the arena during the past few years. With so many carriers vying for market share, capacity has increased while coverage has become broader and more affordable. Most carriers offer a flexible solution allowing customization of the insurance specific to your clients industry and unique needs. It is crucial to place coverage with a carrier whose products best fit your insured’s needs. The best environmental market is the one that offers the broadest coverage to best protect the insured and the carrier who can customize the policy to specifically meet your clients’ needs at an affordable premium.