Thanks to their education, training and experience, professionals in a wide range of fields tend to be successful, respected members of their communities who enjoy excellent reputations and comfortable lifestyles.
Whether advising clients, representing them, or performing services on their behalf, professionals generally do so with good intentions and most often procure favorable or expected results.
When mistakes happen, the consequences can be disastrous, costly or both. Liability insurance is available to protect professionals in the event a claim is filed. Coverage can be tailored to address a host of exposures.
The demands placed on professionals by changes in the legal, regulatory, and economic environment, as well as advances in technology, present myriad challenges to professional liability underwriters.
David Derigiotis, a Senior Professional Lines Broker at Burns & Wilcox, has devoted his career to meeting the complex needs of a wide variety of professionals. Before joining the firm in 2008, Derigiotis was a professional liability underwriter at Argo Pro and Markel.
At Burns & Wilcox, Derigiotis specializes in employment practices liability insurance (EPLI), tech/cyber risks, lawyers, insurance agents, and miscellaneous errors and omissions. The depth and breadth of his experience in underwriting these risks allow him to provide insightful commentary on trends and developments in each of these areas and to explain how his team crafts solutions to address emerging exposures.
Derigiotis said, within his areas of expertise without question, the most significant changes that have occurred over the last five to 10 years have been in EPLI and cyber risks.
“Those are both huge growth areas. Five or 10 years ago, many agents and insureds thought of EPLI as a discretionary or optional coverage. It was a newer product, and a lot of people didn’t understand it.”
“Many larger companies did not think EPLI was necessary because they had a good human resources department, and smaller companies thought they knew their employees and were sure they would never sue” he continued. Since that time there has been an explosion in EPLI claims, and this product has come to the forefront in the insurance marketplace.”
Agents can play an important role in educating their clients about EPLI exposures and the need to obtain the coverage, Derigiotis observed. “Agents need to understand the product and also to understand their clients’ EPLI exposures.” he said. “EPLI is a product that has to be cross-sold with other lines of insurance; it is not something that can be looked at as an extra. EPLI is commonly packaged with D&O or E&O for both nonprofit and for-profit risks.”
For agents who work with smaller insureds, Derigiotis sounds a note of caution. “Sometimes a businessowners policy will include EPLI, but the limit is so low and the coverage is so narrow in scope that I advise agents not to feel comfortable with it.”
Tech and Cyber Risk
Companies that just a few years ago had no presence on the Web are mastering the technologies needed to communicate with clients and transact business in cyberspace.
“As a result, there has been a substantial increase in the tech E&O exposures in almost every industry. The tech E&O line has really exploded in the last 10 years,” he said. “And we continue to see significant growth in tech E&O exposures and demand for the coverage.”
Many people, including agents, use the terms “technology risk” and “cyber risk” interchangeably, Derigiotis remarked, but they are different. “Tech E&O covers errors and omissions for someone who provides service for any kind of computer system: database administrators, software engineers, computer consultants and people who are hands-on with either computers or the software they run,” Derigiotis explained. “People who do this work are vulnerable to claims alleging improper design or installation of software or negligent advice which results in an economic loss to the business to which services were provided.”
For example, he said, “suppose a large online retailer pays a software engineer/ consultant to advise, design and install software to handle credit card transactions and the work is not done properly. The retailer will not be able to do business with customers who want to buy its products online, and it will have a loss of revenue for whatever downtime it experiences.”
On the cyber risk side, Derigiotis said, the online use of credit cards is creating an ever-growing exposure with serious consequences for vendors, financial institutions and consumers. The popular media abound with stories of hackers and dishonest employees gaining access to customer credit card numbers and other information, resulting in identity theft and illicit purchases of everything from gas and groceries to plasma TVs and luxury cruises.
Insurers and intermediaries are developing products to help companies manage this exposure, Derigiotis says, and Burns & Wilcox is committed to making coverage available and helping agents explain it to their clients. Even if someone breaks into a system and does not get any significant information that could result in identity theft, the business still has to notify people that there has been a breach.
Miscellaneous E&O, as its name suggests, covers the errors and omissions exposures of a wide range of professionals. “Miscellaneous E&O is probably one of the most competitive products around,” Derigiotis observed.
“Everybody wants to write it because it is extremely profitable business, for the reason that not many claims are filed. Miscellaneous E&O can cover the spectrum of professional service providers, from the relatively low level risk consultant who advises a newspaper company on what kind of ink to use to the high level-risk faced by a debt collection agency or repossession company,” he explained.
Insurance Agents E&O
Like retailers, financial institutions and other businesses, agents and brokers face an increasing exposure to the risks associated with having a Web presence and transacting business online. Their databases are full of sensitive information and are vulnerable to breach by hackers or dishonest employees. As more agencies go paperless, they must take extreme care not only to protect client data but also to document every exchange with a client or prospect.
I’ve seen many claims where a client thinks he has coverage for something but the agent did not document the client’s request for an endorsement or an increase in limits,” Derigiotis said.
“The request was never forwarded to the insurer, so when a loss occurred the agent had to tell the client that it was not covered. Agents must ensure that every request and communication is properly documented, whether it is a phone call, an email or a face-to-face conversation. Failure to document is the biggest reason for E&O claims against agents,” Derigiotis declared.
Lawyers Professional Liability
Lawyers are definitely a higher-hazard area of professional liability,” Derigiotis said. “A key underwriting factor is the law firm’s specialty or practice area. A firm that is engaged in any kind of plaintiff litigation presents a much higher risk to the insurer; examples are medical malpractice and product liability firms. Also viewed as a higher hazard are firms that deal with intellectual property, like patent and copyright lawyers.”
Support for Agents
Our professional liability division is growing, and we’re aggressively pursuing business” Derigiotis said. “We work mostly with retailers who are not specialists in professional liability. The exciting and beneficial part of Burns & Wilcox is that we have an entire division of specialists dedicated to professional liability and we are available to help our agents understand the exposures and present appropriate coverage solutions to their clients.”
A version of this article was first published in Rough Notes magazine.