Finance 431: Property-Liability Insurance Lecture 18: Professional LiabilityProfessional Liability InsuranceOverview of Professional Liability Exposures and InsuranceSlide 4Slide 5Common Characteristics (cont)Physicians Professional Liability Insurance (also known as Medical Malpractice)Physicians Professional Liability InsuranceSlide 9Slide 10Slide 11Accountants Professional Liability InsuranceSlide 13Slide 14Slide 15Example – Accounting OfficeA client waiting for an appointment with Ned burns himself on hot coffee Ned’s receptionist served.Ned develops eyestrain from reading so much fine print at work and needs to buy eyeglasses.One of Ned’s clients is fined by the IRS when Ned misses a tax filing deadline.One of Ned’s assistants releases the tax forms of one of his clients to a newspaper, which prevents the client from winning a local government contract.One of Ned’s assistants is injured trying to put out a fire at work.The fire described in the prior question damages the firm’s computer system and destroys the tax records of hundreds of clients.Directors and Officers LiabilityLegal Background - ContinuedDirectors and Officers Liability –IndemnificationDirectors and Officers Liability –InsuranceDirectors and Officers Liability –Class Action SuitsSlide 28Slide 29Slide 30Latest Conviction of Tort LawyerFinance 431:Property-Liability InsuranceLecture 18:Professional LiabilityProfessional Liability InsuranceOverview of Exposure and InsurancePhysicians Professional Liability InsuranceAccountants Professional Liability InsuranceDirectors and Officers Liability InsuranceOverview of Professional Liability Exposures and InsuranceDuties of ProfessionalsContractual dutyDamages CompensatoryConsequentialLiquidatedNominalTort-related dutyContract versus tort actionsProfessional corporationsOverview of Professional Liability Exposures and InsuranceProfessional Liability Coverage under CGLProfessional health care services exclusionCoverage restricted to:Bodily injuryProperty damagePersonal injuryAdvertising injuryProfessional liability exclusion sometimes addedProfessional Liability InsuranceCommon CharacteristicsMost coverage written by specialized insurersCovered acts and consequencesDiffers from business exposureCoverage depends on professionMedical - injuryAccountants, attorneys - financial harmErrors and omissions coverage - negligenceCommon Characteristics (cont)Who is coveredProfessionals, partners, owners, officersDefense coverageSometimes included in policy limitsSometimes settlement requires insured’s consentCoverage triggersClaims-made commonExtended reporting period is not guaranteed and not unlimitedCoverage territoryPhysicians Professional Liability Insurance(also known as Medical Malpractice)Loss exposureLegal standards - negligenceStandard of careLocality ruleSpecialists and duty of referralDelegationDiligence and abandonmentInformed consentPhysicians Professional Liability InsuranceCommon allegationsSurgical errorImproper diagnosisImproper testsLack of informed consentUse and administration of anesthetics or drugsPhysicians Professional Liability InsuranceDefenses Statute of limitationsGood Samaritan statutesContributory negligenceInformed consentPhysicians Professional Liability InsurancePolicy provisionsInsuring agreementsIndividual coverageOrganization coverageExclusions (varies by policy)High risk medical proceduresCriminal actsSexual misconductProprietary activitiesPunitive damages DiscriminationPollution ContractualPhysicians Professional Liability InsuranceLoss Control - Measures to reduce or eliminate hazardsDo not diagnose by phoneDo not press for collection of fees if any basis for suitVerify patient identity and operation before surgeryDo not admit faultMaintain professional manner and tactful approachDelegate carefullyCheck medical equipmentMaintain accurate recordsAvoid overly optimistic prognosisMaintain confidentialityArrange for a qualified substituteAccountants Professional Liability InsuranceLoss exposureBreach of contractImproper or incomplete performanceTort liabilityFailure to perform with reasonable professional care and competenceStatutory liabilitySecurities lawsERISAAccountants Professional Liability InsuranceCommon allegations against accountantsTax servicesAudit servicesAccounting servicesClient counterclaims (when suing to collect fees)Failure to detect embezzlementSecurities lawsBusiness and investment adviceBreach of fiduciary dutiesManagement advisory servicesAccountants Professional Liability InsurancePolicy provisionsInsuring agreement Professional servicesDefense costs usually within policy limitsWho is insuredNamed insured, officers, directors, partners,stockholders and employees for professional servicesHeirs, executors, administrators and legalrepresentativesAccountants Professional Liability InsuranceExclusions that may applyBodily injury or property damageDishonest or criminal actsDefense against these charges coveredInnocent insureds held liable for dishonest acts of another are coveredPunitive damagesContractual liabilityExample – Accounting OfficeNed Numbers owns and runs a small accounting firm with the following policies:Building and Personal PropertyCommercial General LiabilityWorkers CompensationAccountants Professional LiabilityFor each of the following incidents, indicate which policy would apply.A client waiting for an appointment with Ned burns himself on hot coffee Ned’s receptionist served.A) Building and Personal PropertyB) Commercial General LiabilityC) Workers CompensationD) Accountants Professional LiabilityE) None of the aboveNed develops eyestrain from reading so much fine print at work and needs to buy eyeglasses.A) Building and Personal PropertyB) Commercial General LiabilityC) Workers CompensationD) Accountants Professional LiabilityE) None of the aboveOne of Ned’s clients is fined by the IRS when Ned misses a tax filing deadline.A) Building and Personal PropertyB) Commercial General LiabilityC) Workers CompensationD) Accountants Professional LiabilityE) None of the aboveOne of Ned’s assistants releases the tax forms of one of his clients to a newspaper, which prevents the client from winning a local government contract.A) Building and Personal PropertyB) Commercial General LiabilityC) Workers CompensationD) Accountants Professional LiabilityE) None of the aboveOne of Ned’s assistants is injured trying to put out a fire at work.A) Building and Personal PropertyB) Commercial General