Professional liability enhancements

Travelers adds coverages that reflect current trends

By Dennis H. Pillsbury

The risks facing professionals have grown dramatically, primarily due to increasing use of the Internet and communications networks. While network and information security exposures are an obvious concern, the increased chance for damage to a professional’s reputation also needs to be considered. The Internet disseminates information and misinformation at a speed that was heretofore only imagined in the minds of science fiction writers and people who wore aluminum foil on their heads.

Travelers decided to take a proactive approach to these changes and introduce a professional liability suite of products that would offer “broad coverage responses for these new exposures,” says Homer Sandridge, vice president, professional liability in the Bond & Financial Products Division. “We needed to make sure that we considered these emerging risks as we developed the coverages that professionals would need in the future.”

The result is Travelers 1st Choice+SM for Professionals, a family of products for small and mid-sized professional firms that was released on January 1, 2009, for four professional liability segments—lawyers, design professionals, accounting professionals and real estate professionals. It had been approved in 46 states as of that date. The new program targets law firms and accounting firms with up to 50 professionals; design professional firms with up to $25 million in revenue; and real estate firms with up to $30 million in revenue.

One of the key features of the new program is the addition of Network and Information Security Offense coverage that covers claims for the transmission of a computer virus; claims for the failure to control access to the insured’s Web site, computer or communications network; and claims for the failure to prevent unauthorized access to, or use of, data containing confidential information of others. “These are big and growing exposures,” Homer points out. “For example, architects often are using Web sites as a centralized data storage site for contractors and other parties involved on a construction project.”

Another new coverage is Crisis Event Expense Reimbursement, under which a professional can “seek the advice of a public relations consultant on how best to handle a situation that could result in damage to the professional’s reputation,” Homer says. A crisis event includes the death or departure of a principal, potential dissolution of the insured, workplace violence, or other event that could have a material adverse effect on the insured’s reputation. The limits of $10,000/$30,000 are outside of the policy limits and there is no deductible.

The program also simplifies the claims reporting process and “gets rid of some of the ‘gotcha’s’ that many insurance policies contain,” Homer notes. “The only reporting requirement in this claims-made form is that the insured report the claim as soon as practical. We got rid of the arbitrary 60-day cut-off for reporting claims after policy is terminated.

“We also introduced a new coverage feature, Pre-Claim Assistance, that encourages insureds to report problems before they become claims,” Homer continues. “Under this feature, we will help the insured mitigate the potential claim, and the expenses incurred will not reduce the policy limits. And there is no deductible.”

While these features are common to all professional liability classes under the new program, there also are unique coverages that have been added or enhanced to reflect the distinct needs of a particular class.

For example, for attorneys and accountants, the program softens what is often referred to as the “hammer clause,” under which an insured must consent to a settlement or be liable to all losses beyond the amount of the settlement. Under this new 1st Choice+ for Professionals provision, “we share the risk for an adverse outcome 50/50 with the insured,” Homer points out.

For real estate professionals, there are no sub-limits or exclusions for failure to advise of pollution, fungi or bacteria. Other unique coverages include automatic inclusion of franchisors and owned property coverage, as long as the ownership interest is less than 10%.

For design professionals, unique coverages include extension to entities that were predecessors to the insured; design-build coverage; extension to insured’s liability arising from participation in joint ventures; and no exclusion for pollution, asbestos or mold.

For lawyers, the program includes directors and officers coverage for insureds serving on boards of nonprofit organizations and publishing liability coverage for publication, sale of distribution of material directly related to the practice of law. Limits are up to $500,000 CSL for both extensions combined. The program also provides pro bono coverage when an insured provides low- or no-cost legal services.

The accounting program extends coverage to an insured while acting as trustee of an individual, family or charitable trust. It also extends coverage to insureds that provide financial, economic or investment advice, including personal financial planning and investment management.

The program also includes risk education that includes advice on the best ways to mitigate risks to avoid or minimize claims. The risk management services include a regular risk management newsletter for each of the professional customer segments that provides market responsive risk management articles to keep insureds informed of changes and trends in the industry. Insureds also have access to Risk Management PLUS+ Online®, with tailored services, articles, checklists and training that can help limit potential exposure.

Coverage for all professionals applies to wrongful acts committed, and claims made, anywhere in the world.

While the program currently extends to four targeted professional niches, “we anticipate adding other professions in the near future,” Homer concludes. “These will include those common features that are needed by nearly all professionals with other elements added to respond to the specific needs of the profession being added to the program.”

For more information:
Travelers 1st Choice+ for Professionals
Contact: Homer Sandridge
Phone: (443) 353-2263
E-mail: HSANDRID@travelers.com