Why Purchase Professional Liability Insurance?

Important message from ASA Benefit Partner, Murray Insurance Associates.

Over the years we have been asked by Business Valuers about the necessity of purchasing Professional Liability (or E&O) insurance for themselves or their business.

The following reasons are the most prevalent in the purchasing decision. 

• The Insurance Policy Will Pay Defense Costs: This is the # 1 reason for purchasing E & O insurance – the policy is written to cover attorney defense fees which can easily run into the tens of thousands of dollars.
  
  
• The Cost of Insurance is Relatively Inexpensive:  Minimum premiums for a policy offering a $1,000,000 limit can start at just $2,000.
  
  
• Low Deductibles: Deductibles for these policies typically start at $1,000 and can go as high as $10,000. The size deductible an insurance underwriter will offer is mostly based on the annual revenues of the firm or Business Valuer.

• The Insurance is Requested From Clients and Attracts New Clients: A considerable number of Business Valuers are being asked in these litigious times to carry Professional Liability Insurance. It is often times requested by the customer or client prior to an engagement.

• Protecting a Firm’s Assets From Losses: Another valid reason to purchase E & O insurance is to protect a firm’s assets from a settlement or litigation costs stemming from a claim or lawsuit. The smaller the firm, the more reason to purchase coverage.

Good Advice to Keep in Mind:

• Claims Made: Policy Form:  Most if not all professional liability insurance purchased is written on a “claims made” form. This means that in order for a claim to be covered, it must be filed with the insurance company during the policy term (or Extended Reporting Period).
  
  
• Prior Acts:  There will be a “Prior Acts or Retroactive Date” on the Declaration Page of the policy.  Thus, claims involving an alleged “wrongful act” or “error” occurring prior to this date will not be covered. The “retroactive date” will typically be the date coverage was first purchased.

• Defense costs erode the Policy’s Limit:  When choosing what limit of liability you should purchase, keep in mind that claims expenses (ie, attorney fees) in addition to settlement payments will erode the policy limit. A claim well defended in litigation will likely mean the policy limit will be reduced for any other claims that have or will be made against the policy for the policy term.

Business Valuers seeking insurance often times have difficulty finding a policy that is affordable. That is why an affinity insurance program for members of the ASA has been established and Business Valuers will seek coverage through the program’s administrator, Murray Insurance Associates.

Murray is able to seek proposals from various insurance companies interested in offering proposals for Business Valuers. Murray will review all proposals and make recommendations on which policy offers the best coverage terms for the most competitive premium.

Jeff Gelburd is Vice President at Murray and has been offering Professional Liability Insurance to Business Valuation Appraisers since 1991. He and Patrick Dixon, Account Executive, currently administer an affinity program sponsored by the American Society of Appraisers offering this insurance protection for Business Valuation members. Anyone having questions or interested in coverage should contact Jeff at jgelburd@murrayins.com or Patrick at pdixon@murrayins.com.