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PF&M at a Glance Accountants professional liability insurance Professional liability insurance, also sometimes referred to as errors and omissions insurance, is a class or group of insurance policies that indemnifies specialists in various professional fields for third-party liability claims due to their negligence in the performance of professional services. Accountants professional liability insurance is a form of professional liability insurance that covers the alleged negligence of accountants in their professional practices and activities. It covers direct monetary loss and expense to the insured accountant or accounting firm arising from claims for alleged neglect, error, omission or dishonesty in the performance of services in a professional accounting capacity. Coverage also applies to acts of office employees, such as typing or clerical errors, in addition to mistakes that can be traced directly to the professional person. Alleged negligence in auditing or preparing financial statements represents the main source of claims and lawsuits against accountants. Tax advice also must be performed with care. These functions give rise to the term “professional services,” broadly described as services performed for others in the insured’s capacity as an accountant or notary. The term includes the notary public function because the act of certifying signatures on financial reports and other accounting documents is an important part of an accounting firm’s operations. Since there is no standard accountants professional liability coverage form, each insurance company that writes the coverage develops and uses its own form. This means that each policy must be examined carefully to determine the extent of the coverage provided and the exclusions, limitations and conditions that apply. While each form or policy is different, they share some common features. Coverage is usually written on a claims-made basis, subject to a specific deductible, with defense expenses inside the policy limits. Damages are compensatory amounts and normally do not include punitive or exemplary damages unless such damages are insurable according to law or statute. Certain expenses are also covered for nominal amounts. Deductibles are expressed as per-claim or as an aggregate but do not apply to coverage for expenses. Exclusions generally apply to exposures for which coverage is available under other coverage forms or that are not insurable under any circumstances, such as intentional or criminal acts. Separate limits for defense coverage may be available in some cases. Key terms are defined and the conditions outline the procedures to be followed in the event of a claim. The broad definition of insured usually provides coverage for predecessor and successor firms and full prior acts coverage is also usually included. Additional professional liability coverages are required if accountants are engaged in other professional activities, such as consulting or while acting as a personal fiduciary or for trustee activities. Special endorsements are available in some cases that address specific issues, such as electronic media exposures, Gramm-Leach-Bliley Act, Sarbanes-Oxley, life insurance sales and services as a registered representative. Most sources offering this coverage utilize extensive and thorough applications that precisely outline the activities of each specific accounting firm, determine the scope of coverage to apply and the rating approach to employ to develop the premium charge. Rating is based in part on the limit of insurance, deductible, extent of services provided and clients served, and the number of both professionals and support persons. Since there is no standard coverage form or policy, eligibility varies based on the nature of the accounting operations performed and other services rendered and the underwriting requirements of the insurance company providing the coverage. Please note that this is only a brief overview of the coverages available in this program. The PF&M Analysis from The Rough Notes Company, Inc., contains broader and more thorough discussions of these and other related subjects. Agency OnLine subscribers can refer to PF&M Section 385.4-2, Accountants Professional Liability Coverage Analysis, for a detailed evaluation, discussion and additional information on this and related subjects. * |
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