Accountants professional liability coverage is readily available and much needed, according to our experts. Chris Zoidis, vice president and director, SRD-International at Burns & Wilcox states, “All accountants should buy this coverage to protect themselves against errors and omissions in performing accounting services.”

Accountants professional is not just for Certified Public Accountants (CPA's). Michelle A. Duffett, executive vice president, Insight Insurance Services, Inc., points out that, “Even a small firm, or a bookkeeping or tax only practice, is not immune from the possibility of a professional liability claim. You don't have to make a professional error to be sued. You only need an unhappy client that believes you did not arrive at the desired result.”

The American Institute of Certified Public Accountants (AICPA) endorses a program from CNA. This program, according to Jeff Day, assistant vice president at CNA, has three tiers uniquely tailored to the different needs of small, medium and large firms. AON is the MGU for this program.

John Torvi, director of marketing and sales at The Herbert H. Landy Insurance Agency, advises that his firm is an MGA for a program designed for accounting firms of all sizes that has no CPA requirement. He states, “The coverage is designed for individuals or firms in practice areas from bookkeeping and tax preparation to business valuation, financial planning and investments services, audits, software, technology consulting and more.”

Coverage is available in both admitted and nonadmitted markets. Mr. Zoidis says he has
competitve Lloyd's markets but also has a number of domestic markets writing this business. He goes on to say that the vast majority of accountant professional business is written on an admitted basis.

Most policies are written on a claims-made basis. For this reason, Mr. Zoidis recommends paying careful attention to the extended reporting periods and retroactive dates. Mr. Torvi agrees and recommends that new coverage purchased continue with the same retroactive coverage. He also recommends that insureds seek out highly rated carriers experienced in writing professional liability for accountants.

A major concern, according to Ms. Duffett, is defense outside the limits coverage. She recommends the coverage for all clients. She notes, “Attorneys are astutely aware of depleting limits with defense costs. Plaintiffs’ attorneys often press for larger but quick settlements, claiming that prolonged defense costs will not allow a remaining limit of liability large enough to cover final damages.” Mr. Zoidis agrees that this is an important coverage but points out that it can be difficult to obtain.

Other enhancements to consider, according to Mr. Day, are “ERISA plan fiduciaries, life agents, registered reps, EPL, Non-Profit D&O, network risk and privacy coverage, receiver/trustee coverage, subpoena coverage, employee dishonesty, bodily injury for CPA elder services, mediation incentive, regulatory inquiry coverage, defendants reimbursement, engagement letter deductible credit and innocent insureds coverage.” Mr. Torvi adds, “Software and technology coverage, financial services, insurance sales and business valuation are common coverages and/or extensions.”

The type of services provided affects the ability to obtain coverage. According to Mr. Torvi, public audits and SEC-related areas of practice are subject to more stringent underwriting. Mr. Zoidis agrees and adds firms that engage in investment advice. He says, “Current events in the financial markets have made it even more difficult to find carriers willing to provide coverage for firms engaged in these operations.” Ms. Duffett adds, “Few, if any, insurers are willing to provide coverage for accounting services on behalf of entities owned by the insured.”

Our experts did not mention capacity as a problem for this class. Limits may start as low as $100,000 with options up to $3,000,000 or $5,000,000 easily available. Even higher limits are available to qualified firms, although excess policies may be needed.

Pricing was decreasing but has stabilized. Premiums are based on revenue, so as the economy declines, according to Ms. Duffett, so does the premium. However, according to Mr. Zoidis, “The recent events in the financial markets will likely firm up pricing for accountants professional liability, as fewer carriers may be willing to write this coverage. Firms engaged in providing audit services and Sarbanes-Oxley/SEC work may be affected more from both a pricing and a capacity standpoint.”

Based on their past experiences, our experts all expect an increase in claims. Ms. Duffett explained that claims increase because clients are less willing or able to absorb an unexpected shortfall. That causes anger with the accountant and has the potential to result in a lawsuit. In addition, financial institutions that rely on accountant's statements to secure loans may sue the accountant if a loan is not being paid. A similar situation may arise with mergers and acquisitions. Finally, problems with increased employee theft often occur during economic downturns and a client may sue the accounting firm for not catching the theft.

Mr. Torvi hopes that current economic conditions and the resulting lawsuits will prompt both the uninsured and underinsured to seek coverage from a quality agent and carrier.