Weighing the options on purchasing public officials’ and educators’ professional liability
It’s an age-old insurance question, whether talking property, casualty, auto or professional liability. As a buyer, how much coverage can you afford to live without in order to get the premium number that fits nicely into your personal or business budget?
Coinsurance and deductibles have always provided much of the latitude required to make a well-balanced decision but, in the professional liability arena, specifically public officials and educators, a wide range of available policy forms bring more sophisticated coverage questions to the forefront.
Agents and brokers servicing clients in the municipal and educational sectors see many package products in the marketplace combining two to four coverages. The public officials’ and educators’ professional liability risks, however, may be shopped on a mono-line basis because the package markets all have varying appetites for the professional exposures. This changes the dynamics of the purchase and provides several challenges/opportunities in the purchasing decision. When deciding between placing the professional liability within the package or on a mono-line basis, purchasers and their representatives should consider the following coverages.
Defense in addition to limit
There are many policy forms available in which payment of defense costs does not erode the policy limits thereby leaving the limits for payment of loss. This “defense in addition to limit” feature should be strongly considered in the purchasing process.
Third party wrongful acts
Is the carrier offering third party wrongful act coverage (also known as business invitee coverage)?
Employment practices liability has become a primary component of most professional lines and now third party liability is available to protect against claims of harassment or personal injury made by a clients or vendors visiting the premises.
Consent to settle with 50 percent co-insurance
Many forms today offer “duty to defend” coverage and thereby immediately take over the defense of any claim. Those carriers, however, also require that they receive the consent of the insured before any settlement is made with the caveat that, should the insured reject the settlement and wish to continue the dispute, they will be responsible for 100 percent of any additional sum they become liable to pay in excess of the original offer. Insureds should not only make sure to purchase a policy that offers “consent to settle” coverage, but also look for a policy which reduces that co-insurance requirement to 50 percent.
Back pay/front pay
Several carriers provide coverage for wages under the employment practices coverage. This may be added as part of an amendatory endorsement but may also be built into the definition of “loss.”
The defense of claims seeking injunctive relief is available in some forms and for varying sub-limits, some as low as $50,000 per claim. However, some provide none at all. Be on the lookout for policy forms that provide this important coverage up to policy limits. Claims for injunctive/non-monetary relief are prevalent in the public officials and educators arena, especially when employment practices liability coverage is included. Therefore, an expanded version of this coverage is preferred and available.
In summary, since the purchasing decision for municipalities and schools is often complex, balancing the need for good coverage with the corresponding cost for that coverage is an important process.
However it is important to note that most coverage enhancements are available on a “cafeteria plan” basis, meaning insureds may select, from any number of the coverages being offered.
So ask the underwriter if these important coverages are available: defense in addition to limit; third party wrongful act coverage; 50 percent co-insurance under consent to settle clause; back pay/front pay; and non-monetary defense.
Martin H. Kanipe Jr., CPCU, ASLI, is founder and owner of Professional Governmental Underwriters Inc. based in Richmond, Va. Ned Daly, RPLU, ARM, is vice president of Underwriting at PGU. PGU was founded in 1993 as a full service risk management company dedicated to assisting public, educational and nonprofit entities. For more information, visit: www.pgui.com.